Defer Student Loans? Paying the Minimum on Credit Cards?

My husband lost his job about a month ago and his emergency fund has run out (we keep our finances mostly separate and it works for us, I don’t want you guys or any of the readers judging the size of his emergency fund). We are very fortunate that our expenses are manageable enough that he can contribute what he’s able to from his unemployment and I can make up the difference to get the bills paid. I’m the main breadwinner and do well enough for myself that I don’t mind, but I might have to put my aggressive debt reduction plan on hold until he starts working again.

So here’s the thing: I’m in grad school, but have continued making student loan payments to try and make a dent in the principal before I graduate. I also am using the snowball method to pay off my credit cards. If I ultimately have to either stop paying my loans (which are in deferment while I’m a student) or go back to paying just the minimums on my cards, what’s the better choice? The dollar amount I would save monthly is the same. — J.

You’ve done the math. Honestly, if the dollar amount you’d save is basically the same, do what feels right to you. Financial experts like to tell people to prioritize student loan debt over credit card debt because if you ever have to declare bankruptcy, you can discharge your credit card debt but not your student loan debt. The federal government can also garnish your wages if you default on your student loans.

What if I had to declare bankruptcy!? Correct me if I’m wrong, but I reckon you won’t be declaring bankruptcy anytime soon. A person who is in aggressive debt payoff mode is probably not worried about declaring bankruptcy. If I were in your position, I’d defer the (probably lower-interest) student loans, and focus on getting rid of the (probably higher-interest) credit card debt. Once the credit cards are paid off, I’d start tackling those loans again. But again, do what you feel is right — if the student loan debt bothers you more than the credit card debt, continue throwing money at the student loans and pay the minimum on the credit cards until your husband finds work again. You can’t really go wrong. Best of luck to you and your husband.

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