Navigating the Resumption of Student Loan Payments: Challenges and Opportunities Ahead
As we cross into September, it marks the return of payments on the interest accrued for college student loan debt. There was hope for many that President Biden would have forgiven up to $20,000 for many graduates. However, millions who put their payments on hold through the pandemic uncertainty will soon see those payments begin again. It’s likely that when this happens, those individuals will cut spending in other areas, causing a substantial lifestyle change.
For many borrowers, this comes at a difficult time. People have adjusted their lifestyles to not having these large debt payments. Coming into a possible recession creates the need for major household cutbacks and difficult decisions. A few headwinds that borrowers face include:
1. High inflation- we have all felt the impact of rising costs, including increased rents, groceries, and utilities.
2. Interest rates- along with the increase in goods, interest rates have recently significantly increased, causing borrowing to nearly cease.
3. Possible recession: As post-pandemic stimulus runs out, there will be more strain on individuals and companies.
With all this looming in individual’s minds, there are ways to reduce the impact of student loan payments commencing. Here are a few possible options that many borrowers are talking with their Financial Advisors about:
1. Income-based payment plans.
2. Government relief programs (depending on your line of work).
3. Employer student loan payment plans (similar to a 401k match, but paying down your loans)
When the items above are not realistic options for you, it will come down to a comprehensive budget review. We are all guilty of having expenses we didn’t even realize we had or spending where we shouldn’t. Now is the time to make these adjustments. Whether it be making your home more efficient to save on utility costs, saving on eating out, cutting monthly subscription services, or paying off high-interest credit card debt, you will find that many individuals can easily save hundreds of dollars a month in cutting back. As painful as these loan payments begin, it creates an opportunity to live fiscally more competent and financially more aware.
This blog is merely opinions, not recommendations. Please consult your financial professional for any questions regarding your financial situation.