Well, COVID-19 has stayed longer than expected... This has affected many American's in many ways including the initial deferment of 43,000,000 American's student loans from March 13, 2020 - September 30, 2020. However, it has been discovered that many student loans have been deferred, once again, until January, 2021.
In our previous post, The COVID-19 Student Loan Trap , we made the recommendation of continuing to pay your student loans and disregarding the deferment due to the fact that the interest rate during the deferment has been reduced to 0% for many loans. However, due to the extension at this time, it is smart to begin building up your savings instead of paying off your STUDENT loans. If you have other loans that are deferred during this time, it is smart to use those usual payments to build up your savings up to three-to-six months of living expenses.
Normally, I am a big advocator in Dave Ramsey's 7 Baby Steps, but this is a slightly unique situation.
If you have loans that are not deferred, please continue to pay them per usual in order to become debt-free as quickly as possible. Once you have three-to-six months of living expenses that can cover your four pillars (food, water, shelter, transportation), please begin paying off your loans ever though deferred. I want you to streamline your savings for two reasons.
The job market is more volatile than usual during this time.
Should you lose your job, and you have an expected expense, you are ready.
It is, also, HUGELY important for you to be budgeting during this time so that you can see where your money is going. Give Every Dollar a purpose.
If you have any questions about whether or not you should be paying a certain payment right now or to see if you are on the right track to getting through this pandemic financially well-off, please feel free to reach out to us!