Payoff during COVID?
We have heard from a handful of borrowers who have paid down their student loans or paid them in full!
Even during the COVID pause, at Champion, we still talk with student loan borrowers each day. Many borrowers have reported they have been relieved during the pause. We have found student loan borrowers report one of the following experiences:
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They can’t afford to restart student loan payments.
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They have used the extra money to pay bills because money has been so tight.
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They are not making payments because they believe the government will do broad-scale student loan forgiveness.
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Some used the extra money to take vacations, make home improvements, or make major purchases (like cars and furniture).
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A few have continued to make payments, and we have heard from a handful of borrowers who have paid down their loans or paid them in full!
How did they pay off or down their loans during the pandemic? It was easier to do so because zero interest has accrued on student loans over the last two years. Payments made now are being applied to the PRINCIPAL, and because none of the payment was applied to INTEREST, the loan is paid off faster.
We sometimes hear a mistaken belief that the government will do a blanket forgiveness program. That belief has caused many borrowers to believe that they should not make ANY student loan payments. The truth is that forgiveness is not happening anytime soon. Actually, there is NO mention of student loan forgiveness in Biden’s proposed 2022 budget, so loan forgiveness is not being considered at this time. We do know that the COVID student loan payment pause has been extended to August 31, 2022, and by that date, 29 long months will have passed since student loan payments were part of a borrower’s monthly budget.
After such a long pause, we are worried about how difficult it will be to add a student loan payment back into a personal budget.
How can you best prepare? The best strategy is to start making payments now to get you and your budget used to making payments.
Benefits of Making Student Loan Payments During COVID Pause
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You can make an accurate budget through the end of the year.
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If the payments get paused again, you will pay down huge amounts of principal on your student loan.
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Because your principal balance will be lower when payments resume, that can also lower your required payment if you have an IDR plan.
Three Student Loan Repayment Strategy Examples
Strategy One: Easing In
Start by looking up your old student loan payment. For this example, your payment was $400 per month. Plan to make payments starting in May and then pay:
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May payment will be 25% or $100
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June will be 50% or $200
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July will be 75% or $300
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August will be full payment of $400
The benefits are that you will have:
1. Prepared yourself to resume payments
2. Reduced your loan principal by $800 plus saved about $300 in interest
3. Pay your loan off two months earlier.

Strategy Two: Consistency
You simply pay 100% of the monthly payment you were making before the COVID pause. That would be:
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May payment $400
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June payment $400
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July payment $400
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August payment $400
The benefits are that you will have:
1. Prepared yourself to resume payments
2. Reduced your loan principal by $1,600 and saved about $600 in interest
3. Paid your loan off five months earlier

Strategy Three: Aggressively
Make payments OVER the minimum and continue to do so after the pause ends.
The benefits are that you will have
1. Prepared yourself to resume payments
2. Reduced your loan principal by $2,800, saved about $1,000 in interest
3. Pay your loan off nine months earlier

MORE Aggressive Strategy Examples
Continuing the Aggressive Payment Strategy
If you continue to make an extra $300 per month in payments, the benefits are that you will have:
1. Prepared yourself to resume payments
2. Reduced your loan principal by $2,800 plus save about $2,200 in interest
3. Pay your loan off 32 months earlier

If you had made aggressive payments during COVID of $700 per month on a $20,000 student loan, your loans would be paid in full!
