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Pros And Cons Of Paying Off Student Loans Early – Should I Pay Off My Student Loans? | 0% Interest Until October 2020

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Pros And Cons Of Paying Off Student Loans Early – Most Popular?

Federal student loan payments are suspended until September 30, 2020 and interest rates are 0%. Should I pay them off ASAP or just pay the minimum?

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While I was watching Tiger King the other day I noticed all my student loans had 0% interest on them. I emailed my loan servicer to see if anything with our loans would be deferred or suspended. Low and behold it happened with the signing of the new CARES Act.

I did what anyone else would do, I posted a survey story on my Instagram asking if I should pay my student loans off ASAP or just pay the minimum.

Let’s take a second to talk about the key details related to student loans from the CARES Act:
1. Federal student loan payments are suspended until September 30, 2020: This means if you decide to not pay your student loan payments, there will be no penalties or late fees. This only applies to FEDERAL LOANS. Private loans are not exempt as a result of the CARES Act.

2. 0% interest: This is what I noticed when I was looking over my loans. No NEW interest will accrue during this time until the end of September. However again, this is only on FEDERAL student loans.

3. Student loan debt collection halted: Any wages, tax refunds, or Social Security benefits will not be garnished during this period to pay for student loans. This used to be 60 days but was extended until the end of September. I didn’t know what this meant but garnished wages typically means your employer withholds a portion of your paycheck to pay the lender through a court order. This doesn’t mean defaults are forgotten, just collections are waived for now.

4. Pausing payments won’t negatively impact student loan forgiveness: I have a few friends and family members who are loan forgiveness programs as long as they make the minimum amount of a certain amount of payments to where their loans are forgiven. If you are one of these individuals, suspending payments will not negatively impact those programs.

What should you do? These are my suggestions and by no means should you take this as financial advice:
1. Pay off high interest debt: This may include credit card debt or any loans you have that hold an interest rate higher than 15%. Minimize your spending on credit line. Since we are ordered to stay indoors, this should be fairly easy unless you are ordering delivery every day. Pay down high interest debt first because I didn’t see any suspended payments or 0% interest on these. Your money will go longer paying these down first.

2. Build up an emergency fund: Since we don’t know how long this will take, take this time to build up 3-6 months of your essential spending in an emergency fund. essential spending includes your mortgage or rent, food, insurance, etc. I suggest keeping it in the high yield savings account so it’ll accumulate some interest but you don’t need it immediately and get withdraw it in a few business days.

Here are the pros to paying down loans ASAP:
1. Payments go directly to the principal balance
2. By the time interest kicks back in, there will be less principal for interest to grow
3. If you are able to pay them off in this time, no more loans
Here are the pros to paying the minimum or suspending payments:
1. Payments are still going to the principal
2. If you’re not paying anything, no interest is accrued
3. By the time interest kicks back in, it’ll be like normal but you’ll hopefully have more cash saved up or invested

What’s right? It really depends on your situation. If you find it better for you psychologically, paying down your student loans solely on the principal will put you in a better spot by the time interest rates go back to normal. If you pay them all off, no more loans. However, if you’ve lost income due to being laid off or you’re already in financial hardship, you can take this time to gain some relief from the suspended payments. If you have credit card debt, take the money that you would’ve used to pay down your student loans to go towards that. If you’re good there, establish, build up or pad your emergency fund.

I’m most likely going to follow these steps. Take care of credit card debt, pad the emergency fund, but most importantly, do what it takes to keep my line of employment. It also wouldn’t hurt to try and find side hustles like building up this channel.

References: https://www.forbes.com/sites/zackfriedman/2020/03/28/student-loans-payments-suspended/#51f690ce1b10

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20 Comments
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20 Comments

  1. Penelope Jane Smith
    July 23, 2021 at 3:34 pm

    AMAZING! One of my clients has like $500,000 in student loans so this is really great news!

  2. 3 Autism Kids
    July 23, 2021 at 3:34 pm

    I’m support your channel Tito roy

  3. Q Makes It Happen
    July 23, 2021 at 3:34 pm

    Awesome breakdown and delivery, new sub!

  4. LifeWithDaf
    July 23, 2021 at 3:34 pm

    Paid off $6k in credit card debt. I have $5k remaining at 14%, but I went ahead and saved $5k for emergency (I had Dave Ramsey’s $1k before COVID) and I’m hoping back into my credit cards now. I’m expecting tax season to be good (I’m an accountant) so I’ll pay if my credit cards and then move on to my student loans $92k…. :/

  5. Shine with Kate
    July 23, 2021 at 3:34 pm

    Fingers crossed for that 50k debt wipe!

  6. esther archange
    July 23, 2021 at 3:34 pm

    Paying mine off October 31,2020 yay!

  7. muradhabibi
    July 23, 2021 at 3:34 pm

    It will be extended – The 0% interest and forbearance for federal loans will be extended past the September 30th deadline. One of the two parties will make it happened. And why? Because our student loans can be, and most likely will be, used as political cannon fodder in an attempt to sway votes, in either political direction. Who ever was responsible for setting the deadline one month before the election, could have also decided to set the deadline after the election.

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    July 23, 2021 at 3:34 pm

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  10. dportal844
    July 23, 2021 at 3:34 pm

    If you have a job during this time and don't take advantage to pay as much of the loans as possible then you are just being an idiot.

  11. sokra
    July 23, 2021 at 3:34 pm

    He said tiger king and I automatically find him relatable..my gen z brain is shook omg.

  12. Johnette
    July 23, 2021 at 3:34 pm

    The fine print states that if you choose to still pay your monthly bill, they still pay off the remaining interest before the principal balance.

  13. Tom Porgy
    July 23, 2021 at 3:34 pm

    No!!!

  14. Scarlet Spain
    July 23, 2021 at 3:34 pm

    So glad I saw this video! I am throwing LOTS of money at my loans. I have high loan debt at a high interest rate. I am hoping to be 15k down from the total principle by September. So here is my question, how will they reconfigure my loans? Will it be the same payment, just paid off early (I have like 26 years left, no thank you!)? Or will they lower the monthly payment? Also, can anyone explain about how the first few years of a 30 year loan you are paying mostly interest? I don't quite understand that factor…

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  17. Carmine Lasco
    July 23, 2021 at 3:34 pm

    What about the default student loans?

  18. Debtfreeliving4ever Steen
    July 23, 2021 at 3:34 pm

    Be sure they get all your income verification I was making on time payment about two years only counted 4-5 payment towards loan forgiveness make sure right plan. Why wait ten years to get debt free! We have emergency fund no car notes no mortgage we took money out of high yield money market to pay off debt faster than well add to longer term investments. Why invest 2 percent if loans 5-6 percent ? Get out debt than you can invest long term when compact interest not working against you! Ramsey says 98 percent don’t get their loans forgiveness

  19. Debtfreeliving4ever Steen
    July 23, 2021 at 3:34 pm

    Yeah we’re pAying ton extra right now why wouldn’t you take advantage of all payments going to principal unless you’re laid off. We have no Cc debt!!

  20. Cj Lawson
    July 23, 2021 at 3:34 pm

    why is my student loans still accruing interest? I have AES success as my loan company for 2 loans and it charges $7 a day. My payments have stopped but interest still going up