Pay big chunk of student loans or take advantage of CARES Act?

#1

I’m soon to be the beneficiary of a $50,000 life insurance policy. Given that I have student debt in excess of that (and that is my only debt) I will be using the full amount towards student loans. My question revolves around timing.

With the CARES act and the recent extension, required payments and interest have been put on hold until the end of the year. With that being the case, why should I not consider putting the $50k in a short term fund (ex: 3 mo. CD) and let it build at least a little bit of money before using it to pay those loans?

In case it matters in the decision: student loans are my only debt, I have an emergency fund built up and contribute enough to my 401k for matching.

#2

If you pay on the student loans with the $50,000 you are going to be that much closer to freedom from payments! It will really charge you up to get to the finish line. You don’t know what will happen in the next 3 days let alone 3 months. Don’t chance it!

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#3

I’m with @beachfamily on this one. I just checked and my local credit union is paying 0.3% APR on a 6 month CD. So on your $50K if you kept it in a CD for 6 months before paying it, you would make $75. I mean. I like $75, but at what risk? What if you miss a payment or the CD locks the money up a little too long or who knows what. Plus, no matter what, you’re getting another bank involved in your life and all the additional hassle and paperwork that comes with it (like paying taxes on your new $75 of income).

Making 0.3% interest for 3 months will not make you rich. Getting out of debt, then converting your debt payments to investing will make you rich. So keep it simple. Throw it all at your debt. Forget the games. :slight_smile:

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#4

Is it worth considering the possibility of student loan forgiveness if the upcoming election changes the current administration? I like the idea of paying off debt, but I was holding out to see what changes with the political landscape before making any big moves.

#5

I’ve actually always been curious about the student loan forgiveness thing. You pay them and sign a contract that basically says you won’t make over 100k ever and they will forgive your debt. Or at least that’s the stipulations they gave me when I looked into it.

#6

I love the talk of loan forgiveness and how prevalent it is in the news, but I highly doubt the banking lobbyists will allow any politician from either side of the aisle to separate them from their precious money. I do think the student loans I signed when I was a kid were predatory. I had no idea what I was doing or reading, all I knew was that “everyone takes on this kind of debt” and, “you have to go to school.” I can now see looking back that I was coerced. I’m not going to be putting that level of trust in the banks or the politicians ever again. Regardless of what they say in a debate or stump speech.

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