The Supreme Court recently ruled against the Biden administration’s plan to forgive up to $20,000 in student loan debt per borrower. In addition, the student loan moratorium that provided relief to millions of borrowers during the pandemic has been lifted, with payments due to start in October of 2023. Collectively, this is a major setback for borrowers who were hoping for relief from their student loan debt.
According to the Federal Reserve, the average student loan balance is now over $30,000. Many borrowers are unable to make their monthly payments, and some may even default on their loans. If you are a borrower who is affected by these recent decisions, there are a few key steps you can take right now to relieve some of the financial stress that student loan payments might be bringing into your life.
Hit the financial reset button. Start by evaluating your current financial picture. Review your income, expenses, and overall budget.
Then adjust your budget to include student loan payments. Use this calculator to help you get an estimate of your new payment. Identify areas where you can potentially cut back on discretionary expenses and prioritize your spending. With a thoughtful review, you can fit student loans into your financial life plan.
Review loan details. Familiarize yourself with the specific details of your student loans. Understand the interest rates, repayment terms, and any available repayment options. Federal student loans typically offer income-driven repayment plans, which can help make your payments more manageable. Research the eligibility criteria and application processes for these programs. Contact your loan servicer or review your online account to gather this information.
Make sure you are on the right repayment plan. If you are not currently on an income-driven repayment plan, consider switching to one. The Biden Administration recently finalized changes to create a more budget-friendly repayment plan, referred to as the SAVE plan, in addition to eliminating common pitfalls to currently offered forgiveness plans and protecting at risk borrowers. This plan can cap your monthly payments at a percentage of your income and better protect you during a hardship, which can make it easier to afford your payments and not derail your financial life.
Consider refinancing your loans. If you have private or federal student loans, explore refinancing your loans to potentially get a lower interest rate. Refinancing can help reduce your monthly payments or shorten the repayment period. However, be mindful that refinancing federal loans into private loans means giving up certain benefits such as income-driven repayment options, potential future deferrals, and loan forgiveness programs.
Reach out to a qualified financial professional for help. If you feel overwhelmed or unsure about navigating the repayment process, consider seeking assistance from an unbiased financial planner through your workplace wellness program or a debt counselor. These professionals can provide personalized guidance based on your unique circumstances and help you create a repayment strategy that aligns with your financial goals. They can get you moving and provide you with the knowledge, guidance, and accountability to take control of your financial life no matter what the financial challenge is.
Stay informed and be proactive. Stay updated on any changes or updates to student loan policies and programs. Be proactive in reaching out to your loan servicer for any questions or concerns you may have. Stay engaged with your loans and commit to meeting your repayment obligations. Consider setting up automatic payments so that you stay on track.
If you are struggling to manage your student loan debt, there are many resources available to help you. You can contact your loan servicer, the Department of Education, or a nonprofit organization that specializes in student loan debt. Here are a few links to those resources.
Take that first step now.
Remember, you are not alone. Millions of borrowers are struggling with student loan debt and even though you might not have received the news you were hoping for, there are great resources at your disposal to help prevent student loan debt from derailing your financial life. Just take it one step at a time and take that first step right now, however small it is. You’ve got this!
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