Keep Paying Federal Student Loans Now If You Can
Most federal student loan borrowers are not required to make payments until October 2020, without the risk of accumulating interest on the balance sheet during that time.
If you find it difficult to pay bills during the coronavirus pandemic, this period of automatic abstinence can take a huge burden off your shoulders.
But if you’re not facing heavy financial labor, you might be wondering what happens if you just keep paying off your student loan debt. Is it worth making payments even if you are not required to?
First, it’s important to understand what this administrative leniency means for your loan balance. Any payments you make during this time will go to the main balance. You do not need to make a “regular” payment if you want to invest in your loans – you can pay any amount. And whether you pay little or no touch on your loans until October, there are no penalties.
Now, let’s look at a few scenarios to help you decide whether to try making any payments right now.
Suppose, hypothetically, you have $ 8,300 left on a student loan at 5% per annum. You have three years to pay off the loan, which means you pay around $ 248 a month. You will finish paying in April 2023 and from now on you will pay $ 655 in interest.
Right now, your loan is frozen for a while. You are not charged interest and you do not need to make payments. Maybe you can shell out a total of just $ 500 for six months of administrative leniency. This will increase your balance from $ 8,300 to $ 7,800. When repayment starts again, you will have three years of payments at $ 234 per month, and when you complete your loan repayments in April 2023, you will pay $ 616 in interest.
Okay, so getting a $ 40 rebate on interest fees may not seem like much (although you can also get your payment reduced by a $ 14 rebate per month). Let’s take a look at another scenario.
Let’s say you have decided to take all of their koronabaksy and send them through the student loan.
Let’s take that $ 1,200 off the top and your balance is $ 7,100. When the watch restarts in October, you stay on the original payment schedule, paying $ 250 a month, even if your service agent says your minimum payment is less than that. You can pay off the loan in full six months early, come out of the negative in October 2022, and pay $ 467.75 in interest. You save $ 188 in interest and pay off debt early.
If you are the one looking to fully implement your debt repayment plan right now, making one or two payments to pay off your loans (or following a “normal” repayment schedule) can have a significant impact on the size of your debt.
And any payment you make will reduce your total debt slightly because you pay less interest on a lower balance. The student loan interest rate is calculated daily , so the sooner you set aside the principal, the less interest you will have to pay over the life of the loan.
But if you’re dealing with financial instability right now, well, it might not be worth the strain trying to make student loan payments when you don’t need to .
If you have high interest debt, such as a credit card balance, it is much more important to pay that bill on time or develop a payment plan with your card issuer. And the basics of access to shelter, food, and safety go beyond any pressure to optimize your finances right now.