Higher education certainly has a big pay-off but paying back your student loans may seem like a burden that will never get paid off. Since March 2020, student loan payments and interest have been suspended, but they’re set to resume in June unless President Joe Biden’s student loan forgiveness program passes.
Updates to the Biden Administration’s forgiveness plan, which would forgive up to $20,000 in student loans for qualified borrowers, came in early January and included (but not limited to):
- Loan forgiveness if you’ve been paying monthly on student loans for 20 years or more.
- $0 monthly payments for low-income borrowers.
- Permanently pausing payments if you earn less than $30,600 annually.
However, lawsuits challenging the legality of the forgiveness program have put things on hold, with the Supreme Court set to deliberate in late February.
Loan forgiveness could make or break a household. While not ideal, preparing for the worst can ensure that you’re in a good financial situation later.
Here are some tips for getting your finances in order:
- It’s time to take another look at your budget or create one if you don’t have one. Go over all your finances for each month and apply your monthly income. If you don’t have much in excess, it might be time to start reducing expenses where you can, whether it’s dining out or a streaming service you don’t need. Make sure you’ve added your student loans into your updated budget.
- Now that you have your student loan accounted for in your budget, start by “paying it” to yourself in a separate savings account. This way, you’ll already be in the habit of paying your loans each month, and you’ll have a backup nest egg to apply to your loan if you need it.
- Understandably, the idea of paying toward multiple debts can be overwhelming. Talking to a certified credit counselor can help you refine or build your budget, and they can also enroll you in a debt management program. If so, your counselor will work with your lenders to reduce your interest rate and consolidate your unsecured loans, personal loans, and credit card debt, into a monthly payment that is affordable and customized to your specific situation.
Knowing your options can help you prepare your finances for the next step, whatever that may be.
Make a FREE online appointment to discuss your options