CLEVELAND — Young professional Megan Ruth works two jobs to help pay off her student loans.
“My second job is used to help pay my student loans off more so than I was just for my full-time job,” said Ruth.
On Jan. 20, at the request of President Joe Biden, the Acting Secretary of Education Mick Zais extended the pause on federal student loan payments through Sept. 30 and kept the interest rate at 0%. Ruth has used this to her advantage.
“I’ve been able to put about $5,000, every couple of months, extra on my loans. So, like I’ll save it all, put it to the side and I’ll just deposit it all, then transfer it over. So, it’s really nice that I’m able to do that. And I think it’s all because of not having the interest,” said Ruth.
Those who lost their job amid the pandemic might be using this pause on payments to stay afloat. For those who didn’t, Cleveland financial planner Jeremy DiTullio has some advice.
“I would take the opportunity, if you haven’t already, to use the relief to build a cash reserve, to build that emergency fund,” said DiTullio.
That means to not spend this extra money on non-necessities.
“Payments are going to be required at some point in the future. So, I wouldn’t adjust your lifestyle to eating out more frequently or going to bars and restaurants. If anything, paying your student loans is a good financial habit,” said DiTullio.
DiTullio also recommended people do what Ruth did: Chip away at their payment as much as possible while the interest rate is at 0%.
“Anytime that you have a debt that’s beyond a zero interest rate, whether it’s a credit card, a car payment, a mortgage, each monthly payment, a portion of that is getting lost just to interest at this moment. Right now, that interest is zero. So, if you put $100, $200 or $300 a month onto your student loan, it’s reduced 100% dollar for dollar for dollar,” said DiTullio.
Lastly, DiTullio said this is a good time for people to revisit their budget and figure out their needs versus wants.
“Every time that there is a pause, my mindset would be that this is the last pause, so plan for the worst. And then if there is additional relief or another pause, now you have choices, but don’t put yourself in a position where you need another pause,” said DiTullio.
And Ruth is already taking this advice in stride.
“I don’t want to be hating myself later in life. When I have all these student loans to pay off, trying to start a family, trying to get a house it’s like, now I can just kill them and put all that extra money. I mean, I work all the time. Like I work two jobs, you know, back to back a lot of the time. So it’s, I don’t really have the time to go out and I would rather spend the money and pay off my debt than spend the money anywhere else,” said Ruth.
For additional resources regarding federal student loans, you can go to studentaid.gov.
