Biden is canceling up to $10K in student loans and all federal loans are paused until 12/31
The coronavirus relief bill was signed by President Trump on March 27, days after the Senate voted unanimously on a $2.2 trillion stimulus package to help businesses and individuals affected by the pandemic. Parts of the funds will be sent in the form of checks of up to $1,200 to individuals with an adjusted gross income of less than $75,000 or married couples with less than $150,000 and will include $500 per dependent child.
This money will offer much-needed support for millions of Americans whose situation has changed drastically in the past few weeks and have seen their job stability affected.
Whether or not you feel you may be at risk of losing your job, in this article we’ll list some ways to make the best use of your stimulus check.
According to Jonathan Parker, a finance professor at MIT, who studied the effects of the stimulus payments of 2001 and 2008 - households ended up spending about 50% to 90% of their 2008 stimulus payments in the first three months. This means people need to make use of the money immediately. As the situation changes and you have to pay rent and cover other expenses, you don’t want to lock that money in stocks or retirement accounts where you cant access it. Even though right now you are not penalized for withdrawing your money because of the relief bill, you still want to have it in a place where you are able to access it the same day.
Before anything else, make sure your immediate needs are covered. Stock up on food and any medication you might need in the next 30 days, household items and cleaning supplies. Cover your rent or mortgage, as well as utility bills. Check with your landlord to see if there is any relief in place due to the outbreak.
This is something that you should have been working towards before a crisis. But if you haven’t already started, we recommend to aggressively start contributing to your emergency fund. Given the uncertainty of how long the outbreak will last, ideally, you would want to save up to 6 months of living expenses if you don’t have job stability. While the $1,200 may not be enough to cover the entire amount, it can be used as a starting point.
Before making any payment, make sure to check with your lender because some are offering relief in the form of deferred payments and 0% interest. If you still have to make payments, we recommend focusing on the highest interest debts first, and the ones you can’t stop payments for. Federal student loans are pausing interest and deferring payments for 6 months. Stop payments If you can’t afford to keep making them - however, if you feel you’re in a comfortable position you can still contribute to the principal payments.
If you feel you are in a good position with all the essentials covered, you have job security, no debt and provided you don’t need this money - then you may consider to continue contributing to your retirement investment account or perhaps help support the local economy. You can help keep the money in the local economy by going to smaller stores. You’re also more likely to find toilet paper there.
A lot of businesses are going through a tough time right now, a total of 22 million Americans have filed for unemployment in the last 4 weeks - which may still be shy of the real number. If you’re in a position where you’re able to spend your stimulus payment, try helping your favorite restaurants or local businesses. Some are offering gift cards to be redeemed for future consumption once things are back to normal. These are basically interest-free loans you are giving to your local merchants. If you are shopping at local businesses, try making your orders a little bit bigger to support these places. If you have services that you pay for regularly (E.g. a nanny, gardener, cleaner) that have had to stop working because of the outbreak, consider making payments to help them get through this situation because when things are back to normal, you still want to do business with those people.