Kelly Blodgett launched Money Gal Coaching with a goal of serving people who, like her, were burdened by debt. You can get her tips for paying down debt on a regular basis at Bring Me The News, in addition to the Money Gal Coaching website and Facebook page. Here is her latest story:
May I extend my fullest congratulations to those with federal student loans. You are granted, yet again, an extension to when your payments will resume.
Now let me put my overbearing mother hat on and ask you, “what are you doing about it?” How are you improving your finances with this never-been-done-before miracle that has come out of a horrible time for our world?
These COVID relief measures mean much more than simply not having to make your payment. The bigger piece is that you are not accruing any more interest. Compound interest can be a wonderful thing when you are earning it, but it has the opposite effect when you owe it on a debt.
What happens if you continue to make your payments when they aren’t required? The monthly national average for a federal loan payment is $393, which if paid now while you're not accruing interest, goes directly to the balance of the loan.
Normally a piece of that $393 payment goes towards the principal balance and another part goes towards new interest that has accrued since your last payment. Your payment has less of an impact when you are also paying on interest, taking longer to pay off your loan.
Now I ask you again, what will you be doing with this newly awarded time? Are you paying off high interest debt? Are you using it to increase the amount saved in your emergency fund? Are you doing the work to get on a working budget while you have some wiggle room?
If you didn’t say yes to one of the above, why not? I am a true believer in everything happens for a reason and if this wasn’t a huge wakeup call I don’t know what is.
We have been taking our health, relationships and finances for granted for decades. I am not the first to write about what 2020 has taught us but I am here to reiterate it for those of you with federal loan debt.
How you focus your time and energy with your finances these coming months will have a major impact on the rest of your life, good or bad.
Are you going to continue to look the other way from your debt, knowing it will get paid off eventually, or are you going to jump in the deep end, as hard as it might be, and create a plan to change your future for the better?
Not sure where to start? Overwhelmed? Let’s chat. It’s free and I can help you get started mastering this thing known as personal finance.
Disclaimer: Bring Me The News will receive a portion of the proceeds from readers who purchase a service from Money Gal Coaching via our articles.