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If it’s 2020 and you happen to come across this, then you know we live in an unusual time. Without a doubt, you know someone who has faced hardship or lost their job. Maybe you’ve faced some of that yourself. Also, you’ve heard about the CARES Act and found out that there’s a forbearance on student loans. This begs the question: Should I continue to pay my student loans during COVID?

Indeed, student loans are no fun. You might even say they’re pretty scary. And who really likes seeing that money come out of your bank account every month? The answer is no one! So, who wouldn’t jump at the chance to stop paying their student loans during a pandemic?

But hold on, cowboy. You still have some things to consider before you bring a full stop to your student loan payments.

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    What Does the CARES Act Say About Student Loans?

    I’m going to try and make this as simple as possible. But if you want to read about EVERYTHING regarding student loans and the CARES Act, you can do so here.

    Essentially, the CARES Act has set a forbearance period for all federal student loans. In other words, all federal student loans currently have a 0% interest rate. Furthermore, borrowers can choose to opt-out of payments during the forbearance period.

    Originally, the CARES Act scheduled the forbearance period to end on September 30th, 2020. However, Congress has extended the forbearance until December 31st, 2020.

    One thing to keep in mind is that the CARES Act provisions only apply to the following federal student loans:

    • Direct Stafford Loans
    • Direct Parent PLUS Loans
    • Federal Perkins Loans (If not owned by a commercial lender)
    • Direct Consolidation Loans
    • Federal Family Education Loans (If not owned by a commercial lender)

    Sorry, but you’re out of luck if you have student loans with a private lender. However, you can always check with your lender to see what they might offer for relief.

    This is NOT student loan forgiveness

    The provisions of the CARES Act are NOT student loan forgiveness. They only allow you to cease payment on your student loans until a specified date. You’ll have to start making payments again at the beginning of 2021.

    Never, ever depend on student loan forgiveness.

    I Have a Federal Student Loan. Should I Pay My Student Loans During COVID?

    It depends. Unfortunately, there’s not a one-size-fits-all answer to this questions. Under some circumstances, you should stop your payments. However, I would recommend most people to either continue their payments as normal. In fact, I would say you have one of the best opportunities to knock out your loans even faster!

    First, let’s take a look at when you should stop your payments. After that, we’ll discuss when you should continue making payments. As a bonus, we’ll talk about the awesome advantages should you continue to pay student loans during COVID.

    When Should I Stop My Student Loan Payments?

    Here are the only times I recommend you stop all student loan payments:

    First, if you’ve experienced a job loss, you should consider halting your student loan payments. Losing your job means you need to enter survival mode. Your primary concerns should be four things:

    • Food: Eating is essential for life. Therefore, it’s essential to your budget.
    • Shelter: You need a place to live to protect you from the elements.
    • Utilities: Make sure you keep the lights on and the water running.
    • Transportation: You need transportation to get to work.

    In the event of a job loss, all other things are secondary. Scrounge together every penny you have and make sure your family can eat, have a place to live, and can get around.

    Also, if you have about a 50/50 chance of a layoff, it’s time to stockpile money like Ebenezer Scrooge. In other words, I wouldn’t have a problem with you stopping your payments for a bit. But if you survive the layoffs, it’s back to business as usual.

    Finally, it’s okay to stop payments if you get COVID and can’t work. After all, they’re not going to roll your hospital bed down to the office.

    When Should I Continue to Pay My Student Loans?

    Maybe earlier this year you fell into one of the categories above. However, you’ve recovered and ready to work. So, what does this mean for your student loan payments?

    If your income is stable and the likelihood of a layoff is almost zero, then you should continue your payments. Otherwise, there’s absolutely no reason to stop paying your student loan.

    Why? Because you still have to pay it back. That responsibility doesn’t disappear with the advent of COVID-19. Sure, you could choose to delay it. But then you will have spent a whole year without making ANY progress on your student loans.

    What Are the Benefits of Continuing My Payments?

    So, your income is stable, you work normal hours, and you don’t have a personal crisis. Still, not having to pay sounds awfully tempting. How could continuing to pay your student loans during COVID benefit you? I have three reasons why.

    1. Federal student loans currently have a 0% interest rate

    For one, federal student loans, and some private loans, have a 0% interest rate right now. While some people see it as an opportunity to shirk payments, I prefer to see it as a chance to make progress.

    Here’s what I mean: A 0% interest rate means every bit of your payment goes towards the principal balance! This gives you the opportunity to make some real progress. Not to mention, continuing to pay can save you thousands in the long run.

    2. Continuing to pay will keep you from being caught off guard later

    However you look at it, you’ll have to start making payments again. What can happen for most people is you start to enjoy the extra cash flow. It feels pretty good, right? Then all of a sudden that money comes running out of your bank account again!

    Continuing payments will help you stay on track. Furthermore, it will keep you from falsely increasing your lifestyle. After all, you still owe the money.

    3. There’s no penalty for continuing payments

    Guess what? You can opt into forbearance AND you can still make extra payments! And the best part? You will not get a penalty for doing so.

    This is a big rarity in the loan world. Typically, loans have lots of strings attached when it comes to forbearance options. But not so this time around. Therefore, right now is a darn good time to consider making real progress on those student loans!

    Create a Plan to Pay Down Your Student Loans

    So, should you continue to pay your student loans during COVID? If you have stable circumstances, then absolutely! However, you still need a plan if you want to make progress.

    First, before you do anything else, I recommend you make a budget. A budget is simply you telling your money where to go.

    After you create your budget, save up enough money for a small emergency fund. Around $1,000 should be enough while you pay off your debt.

    Once you have your starter emergency fund in place, it’s time to start knocking out that debt! Order your debts from smallest to largest, regardless of the interest rate. After that, use the debt snowball method to destroy your debt. This is also the best way to pay off your student loans.

    Once you pay off your debt, you can really start building real wealth! Now you can build a larger emergency fund, save more for retirement, and increase your generosity!

    What if I Need Help Making a Plan?

    There are a couple of resources I HIGHLY recommend. These have helped me tremendously, and I apply the principles in these resources in my personal life.

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    I found that Dave Ramsey’s 7 Baby Step plan works extraordinarily well. Dave Ramsey highlights this in his book, The Total Money Makeover. This truly is a simple, step-by-step plan for building wealth that works for just about anybody. If you click the image above, it will take you straight to Amazon where you can purchase his book.

    If you’re about to graduate high school and want to avoid student loans, then I highly recommend Debt Free Degree by Anthony ONeal. This will lay out a step-by-step plan to help you obtain your degree without student loans.

    Now go out there and knock out that debt!

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      Don’t worry, we won’t spam you. Unsubscribe at any time.

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