Student Loan + Relief
At the beginning of August the U.S. Department of Education announced a final extension of the student loan payment pause until Jan. 31, 2022 which includes a suspension of loan payments at 0% interest & stopped collections on defaulted loans.
This extension is something we've never seen before. 0% interest on Federal Student Loans + the option to continue pushing off payments until the end of January 2022. And if employment continues, this will not have any impacts on using the Public Service Loan Forgiveness Program.
So, if you stopped paying student loans during the pandemic due to this government relief, that means you've found a way to add some money back into your budgets each month. For some, this maybe meant catching up on other debts like credit cards and private loans. But for others it maybe meant spending more money on other fun activities and desires. But has anyone continued keeping that student loan payment in their budget to either redirect towards saving or even continue making payments to save on loan interest?
If you're planning to take advantage of a loan forgiveness program not impacted by this legislation, then stopping the payments was a wise decision. Although if there's no student loan forgiveness program on the horizon, then maybe not a wise decision. You had 22 months to pay the loan down quicker without any interest being stacked on (that's the number of months the relief benefits were available for).
If taking advantage of a loan forgiveness program is the plan of action, and you're still working but decided to stop payments, then here's what makes the wise decision even wiser. There are two benefits to redirecting the student loan payment amount to your savings. Again, if you take the monthly student loan payment multiply you were making and multiply it by 22 months, that's the amount you would have been able to redirect to your savings, benefit #1. Now come February 2022, that amount is already part of your budget and something you're used as part of your cash flow and all you'll have to do is redirect that amount, benefit #2.
Spending that student loan payment elsewhere rather than putting into your savings is going to make it much more difficult to start paying come February 2022. It may be more stressful and overwhelming to think about starting that payment amount again shortly into the new year. So start now!
Add your student loan payment back into your budget now, and start saving it in your bank account. Build up your emergency fund, cushion, rainy-day fund, or whatever you'd like to call it! Be ready to have that payment start in February! Set yourself up to feel comfortable and more confident about your finances! It's never to late to put a strategy like this together which will ultimately set you up for that next big moment in life!
Any questions?!!? OK Get to it! 💪🏼 Feel free to reach out if you do.
Stay tuned as additional legislation is being developed surrounding student loan repayments and additional loan forgiveness that may become available!