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Should You Pay Your Student Loans if You Can?

With the global pandemic affecting millions of Americans, the President signed the CARES Act which provides relief for student loan borrowers. Federal student loan borrowers will automatically be placed in forbearance, where they can stop making payments until September 30, 2020. To learn more, read our article on student loan forbearance.

Should you pay your student loans if you can?

Federal student loans are in forbearance and are interest-free from March 13, 2020, through September 30, 2020. That is a huge relief for borrowers who have been affected by the pandemic. However, if you have job stability and feel you are in a good position you may be wondering: Should I keep making payments to my student loan?

The answer depends entirely on your financial situation. It makes sense to keep making payments if you meet the following:

You have an emergency fund

An emergency fund can protect you if you lose your job and prevent you from losing your housing, taking on high-interest debt, or going into bankruptcy. We usually recommend setting aside 6 months of living expenses. However, if you feel you may be at risk of losing your job due to the COVID-19 outbreak, it might be better to contribute more than 6 months.

You don’t have high-interest debt:

Anything above 6% is considered high-interest and you should focus on paying it off first. There are opportunity costs associated with paying down loans and by paying off high-interest credit card debt first you will save more money in the long run. If you have any private student loans, you should defer payments on the federal loans and allocate that money towards the higher interest private loans instead.


It’s important to understand that any payment you make through September 30, 2020, will go directly towards the principal once all interest accrued prior to March 13, 2020, is paid. If you meet the criteria above and feel comfortable doing so, it would be ideal if you could continue to contribute towards your principal payment. Continuing to make payments during the forbearance could help you pay down your loan balance faster because it will decrease the principal, and a lower overall loan balance would accrue less interest. It does not matter if you pay now or if you pay in September because the interest rate is the same. Ideally, you would want to save the money you would normally pay towards your student loan in a high yield savings account, earn some interest on that money (even if it’s just a few dollars) and make a lump sum payment before or on September 30th.

In the end, it depends on your situation. If you have job stability and are in a good financial position with no high-interest debt, then it would be a smart move to keep paying your student loans. On the other hand, if you have lost your job or feel you may be at risk of losing it, then you should not pay your student loans and use that money for essential living expenses and to keep contributing to your emergency fund. Alternatively, if you have not lost your job but have other high-interest debt such as credit cards, you’re better off paying the higher interest debt first so you can save more money in the long run.

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