Here’s how COVID lockdown helped millennials save, and even pay off student loans

Trader Talk

I wasn’t thinking about my student loans a year ago.

In April, 2020, I was thinking about the wailing sirens from ambulances speeding past my apartment day and night, an endless reminder of COVID-19, which has since killed more than 500,000 people in the U.S. and nearly 3 million worldwide. I was thinking about my friends and family who were sick with the coronavirus, and the others who lost their jobs and didn’t know what would come next.

And I thought about just how privileged I was to have a career that allowed me to work safely from home as the pandemic ripped across New York City and the rest of the country.

A silver lining of this global catastrophe is that it allowed people in my position an opportunity to make significant progress towards their personal financial goals. Nearly half of affluent Americans used the pandemic to get their financial lives in order, and 81% set aside money they would normally spend on entertainment, travel and dining, according to a Bank of America survey.

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While I don’t yet qualify as affluent (Bank of America set the bar at adults over 25 with at least $100,000 of investable assets), I can now say that I have a positive net worth for the first time in a decade. Thanks to a steady income and a year without vacations, concerts, live sports, movies or bar tabs — especially bar tabs — I was able to accomplish a financial goal that, until recently, seemed years out of reach.

I finally paid off my student loans.

Financial advisors say this has been a theme among younger clients. One client of Theresa Morrison, founder of the Tucson-based Beckett Collective, found such success with her side-hustle business that she was able to repay the family mortgage and hopes to repay her student loans next year.

Others are using the extra money in their checking accounts to move to less-expensive parts of the country, Morrison says.

One key has been the government’s moratorium on student loan payments and interest, says Noah Damsky, a principal with Los Angeles-based RIA Marina Wealth Advisors. For some, the savings can relieve the stress that comes with being furloughed from work, he says. For others, it can be enough to buy their first home.

“Regardless of what end of the wealth spectrum you’re on, many folks could delay their student loan payments without consequences,” Damsky says. “It’s trying to find the silver lining … Obviously everything going on is tragic in terms of the loss of life and health and loss of income. We try to help clients cushion the blow in events like this but also look for opportunity.”

Donavon Brooks, founder of Storyline Financial Planning in St. Joseph, Missouri, says he plans for clients receiving any unexpected windfall. So when the government issued the first round of stimulus checks, Brooks knew who could shore up savings, who could eliminate high-interest debt, and who could contribute to local businesses impacted by lockdown orders.

Few of the conversations ever turned towards investing, he says.

“The way clients came to me, people were really worried about their initial savings and debt and what it means for them,” Brooks says. It also became a teachable moment for many people on how they use their discretionary budgets. “I got to have some pretty cool conversations about, ‘What do you actually need? What were you spending money on that you can do without now?’ Not that they have to cut it out all together, but they see the effect of just scaling it back.”

I unfortunately missed the opportunity to take advantage of the government’s student loan relief measures. Years ago, after living paycheck-to-paycheck on the “hope the government defaults” repayment plan, I finally scored a reporting job that earned enough for me to contribute beyond the monthly minimums. I had an affordable apartment and interest rates were good, so I refinanced with an online lender with the goal of being done in just five years with some albeit pretty high monthly payments.

Financial Planning technology editor Ryan W. Neal graduated from Columbia University Graduate School of Journalism in 2012.

It was more-than-my-monthly-rent high, but I figured I could pull it off with just a few years of austerity.

Of course, life happened. I lost the cheap apartment and suddenly living expenses tripled. A broken leg here, a family emergency in California there, and it felt like I’d never make it to Mordor to throw this burden into the Cracks of Doom.

So during the coronavirus pandemic, I started small. After donating to funds supporting some of my city’s favorite bartenders and helping where I could with friends’ new side hustles, I first topped off my emergency fund — the first pillar of a financial plan. Next, I took care of some expenses I had been putting off for years, like finally getting myself some workable kitchen gear, a vacuum that wasn’t held together with duct tape, and a dining table that could double as my work-from-home desk.

After that, I squirreled away extra cash and my stimulus check into a high-yield savings account on top of making my regular, ridiculous monthly payments. When my February statements arrived it hit me — I can actually do this.

Now, with the first dose of coronavirus vaccine in my arm and no more monthly payments, I’m ready to step back into the world. This time, I’ll be debt-free.

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