I used my stimulus check to make my last student loan payment, and I know I’m in a privileged position
- My husband and I had the goal of repaying my
student loan debtby fall 2020. We had about $5,500 left at the end of 2019.
- When the
coronavirushit, we received a stimulus checkof $3,400 and I used about $2,000 to pay the last of my student loans.
- While it feels good to be debt free, I know we are privileged – we continue to have steady jobs and we didn’t need the money to pay our bills or support our families.
When my husband and I decided to get serious about paying off our debts in 2020, we certainly didn’t plan on doing it during a global pandemic. Like everyone in the country and around the world, our lives have changed dramatically over the past few months. But unlike the tens of millions of Americans who have filed for unemployment in recent weeks, we have been able to keep our jobs and a stable income.
We decided in January to make paying off my federal student loans our biggest financial priority for the year, but I never imagined that a government stimulus check would help us do that.
I had several subsidized and unsubsidized loans from the Ministry of Education with an interest rate of 6.8%. My husband didn’t graduate with student debt, and while we worked together to pay off mine, I knew it was getting in the way of our other goals, like saving for retirement. At the end of 2019, we had about $5,500 left to pay and after years of making the minimum monthly payment, it felt like the end was in sight.
We made progress towards this goal in the first two months of the year. Then the pandemic hit, and we were incredibly lucky not to experience major financial hardship.
The $3,400 stimulus check we received from the government enabled us to make our final student loan payment of $1,969, and while I am relieved to finally be free of student loan debt, I am still struggling with my complicated feelings about using stimulus money to get ahead when so many other people are in financial turmoil.
My student loans were holding us back
I graduated from college in 2011, and after eight years of making the minimum monthly payment of $270 on my $22,000 student loan debt, my husband and I decided to get serious about paying it off in 2020.
After adding another baby to our family last year, we realized that the money earmarked for this payment could go a long way toward childcare costs or saving money for a down payment on a newer, larger vehicle. . Getting rid of this debt became our biggest priority, and we decided to allocate any extra income after paying our bills to my $5,500 student loan balance with the goal of paying it off by August 2020.
It wasn’t fun putting all of our vacation money into paying off my student loan, but it was rewarding to watch the balance go down each month. We were also able to reduce our budget and reduce other expenses, freeing up an additional $230 per month that we could spend on our payment, making it $500 per month.
With these changes, we might see light at the end of the student loan tunnel. What had seemed like a distant goal for so long finally felt within reach. Between January and March, we paid off about $3,000 of our remaining balance, and then the pandemic hit.
COVID-19 has caused us to consider changing our priorities
As the coronavirus outbreak spread across the United States in early March and many states implemented stay-at-home orders, my husband and I felt swept up in uncertainty about what all it would mean for us.
He works as a mechanical engineer and is able to do much of his work from home, so it didn’t look like his job was in any danger, although we knew that could change in an instant. I was already working from home as a freelance journalist, but the nature of my job (and income) fluctuates, and I had no idea what an unprecedented pandemic would mean for me.
So far I’ve been very lucky not to lose a lot of clients and I’ve even been able to land a few more projects. Yet, although our income seems stable at the moment, we know nothing is guaranteed, and this new layer of precariousness has made us question our financial goals.
Should we really be spending all of our extra income on paying off my student loan? Or should we put it in savings as an extra cushion? Should we take advantage of forbearance on my student loans or continue to make payments since we can?
When our $3,400 stimulus check ($1,200 each for two adults, $500 each for two children) hit our bank account in April, we thought about all the ways we could use it. It would certainly help pay for groceries, an expense that has increased during social distancing. Or we could put it toward our $1,600 monthly childcare expenses, something we continued to pay whether our daycare stayed open or not. Or we could put everything into our savings and know we have a safety net if my husband loses his job or I lose all my clients.
After weighing all the options, I scheduled an online payment of $1,969 – the final payment for my undergraduate student loans. We made this decision because we already have an emergency fund of $5,000, and although we sometimes worry that it might not be enough, we also knew that paying off my student debt would free up $500 of monthly cash flow, which would give us leeway in other areas of our budget or allow us to continue to build up our savings.
We were on track to pay off my student loans by fall 2020, but our stimulus check helped us reach that milestone four months earlier than we otherwise would have.
Our privilege allowed us to use our stimulus check for my loans
Paying off my student loans feels like a small victory in the midst of so much suffering, but we were only able to do so because of our financial, class, and racial privilege.
As white collar workers with the ability to work from home, we were able to keep our jobs and as a result our incomes remained stable. Everyone has lost something to some degree during this crisis, but our struggles pale in comparison to those who have lost their livelihoods or loved ones to COVID-19.
We had a choice as to how to spend our stimulus check. But for so many others, this assistance is a means of survival, of keeping the lights on or food on the table. When it comes to life through a pandemic, we really are in the best of times – we have financial security, we have our health, and we have each other.
Read the original article on Business Insider