In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

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TVofMoney
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In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by TVofMoney » Mon Jun 29, 2020 9:28 am

Currently have $11k in student loans at 5.5%. Emergency fund of $36k which is about 4.5 months of expenses with no scale-back, 6 months at slight scale back. My wife and I have no indications that either of our jobs are at risk (knock on wood), but there is obviously uncertainty with COVID-19. Normally I would pay off the loan with no hesitation, and rebuild the E-fund, but am curious as to what those on this forum would do under the current situation. Pay off the loan or continue to bolster emergency fund until COVID clears up?
Shift all the blame, take all the credit, maximize income, minimize direct reports

Oddball
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by Oddball » Mon Jun 29, 2020 11:24 am

I would hold the loans for another year at least. The APR isn't great but isn't crazy either. I would kick myself if I paid off $11k and then (soon) down the road there are some student loan forgiveness law put in place.

gr7070
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by gr7070 » Mon Jun 29, 2020 12:27 pm

Keep the EF intact.

That coming from someone who dislikes needlessly large EFs almost as much as high rate debt.

Note your EF is not needlessly large.

With two stable incomes and a 6 month EF you don't need to increase the EF in favor of paying down extra on the loans. Though with the pandemic it could certainly be argued reasonably for increasing short term.

I'd keep status quo and put future excess toward that debt.

j0nnyg1984
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by j0nnyg1984 » Mon Jun 29, 2020 3:35 pm

I would pay off the loan before the close of business today. You’ve already said it, no indications that your jobs are at risk, etc. Pay it off and cut your expenses down until you get to a point where your EF feels comfortable.

If your bank account was at 15k, it’d be a completely different discussion.

as9
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by as9 » Mon Jun 29, 2020 3:41 pm

Oddball wrote:
Mon Jun 29, 2020 11:24 am
I would hold the loans for another year at least. The APR isn't great but isn't crazy either. I would kick myself if I paid off $11k and then (soon) down the road there are some student loan forgiveness law put in place.
I've seen this line of thinking a few times (and not just on here). I certainly wouldn't be basing my decision on something that a) may never happen and b) would almost certainly come with income or asset restrictions.

Personally, I'd pay it off and then take your loan payment + any excess and replenish as quickly as possible.

stoptothink
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by stoptothink » Mon Jun 29, 2020 3:44 pm

j0nnyg1984 wrote:
Mon Jun 29, 2020 3:35 pm
I would pay off the loan before the close of business today. You’ve already said it, no indications that your jobs are at risk, etc. Pay it off and cut your expenses down until you get to a point where your EF feels comfortable.

If your bank account was at 15k, it’d be a completely different discussion.
+1. Since when is $25k not a sufficient EF? I paid off my home last month (with a lower interest rate), which (for a week) left us with - gasp - only $2k in quickly available cash (but multiple 6-figures in other resources in the infinitesimally small chance an "emergency" actually occurred).

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Nate79
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by Nate79 » Mon Jun 29, 2020 4:57 pm

I would just pay it off then rebuild the E fund. Remember that even if you lose your job you will likely have unemployment payments in addition to your E fund.

Priam
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by Priam » Mon Jun 29, 2020 6:34 pm

I was in the same position as you and decided to leave my student loans as monthly payments. My thought process was at the end of the day my emergency fund was never intended to be used to pay for my loan and secondly while I also don’t think I’d be fire from my job there’s no way for me to really know that. Thirdly, I honestly don’t know how long it would take me to find another job because I have no way of knowing what the job market would look like at the time I got laid off. So in the end I decided that I’d rather stick to my original plan and have peace of mind.

mortfree
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by mortfree » Mon Jun 29, 2020 7:16 pm

I would pay it off today. But that’s me.

Some other ideas:
Pay 1k per month for the next 11-12 months

Lump sum 5k now and see where things are 3 months from now. Re-evaluate

Pay the required amount and re-evaluate in a few months.

Or some variation of the above.

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TVofMoney
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Re: In COVID-19 Uncertainty - pay off student loan or bolster emergency fund?

Post by TVofMoney » Fri Jul 10, 2020 1:05 pm

Update: Ended up paying it off completely. Have to say, even after being on the fence at first, feels great and zero regrets.
Shift all the blame, take all the credit, maximize income, minimize direct reports

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