Student Loan Payments to Resume: Debt Repayment or Basic Necessities?

student-loan-payments-to-resume-debt-repayment-or-basic-necessities

The return of federal student loan payments will inflict havoc on the budgets of borrowers. On September 1, interest accruals will recommence, and payments are due in October for the first time in over three years.

When the pandemic forbearance terminates, however, (56%) borrowers state that they will likely be compelled to choose between completing their loan payment and handling essentials like rent and food, according to a recent Credit Karma survey. 

 Despite the fact that the worst of the pandemic is behind us and inflation is down from its precipitous rise last year, the resumption of student loan payments is likely to wreak havoc on millions of households that have found financial stability in the past three years.

Even those with larger incomes will struggle once payments resume. Credit Karma finds that 68 percent of borrowers with household incomes of less than $50,000 will be forced to choose between making loan payments and purchasing necessities.

45% of borrowers with household incomes of more than $100,000 say they will be compelled to make these difficult decisions. Applying for an income-based repayment plan could be a particularly helpful option for borrowers with modest incomes. Credit Karma reports that only 34% of borrowers will register for an IDR plan to reduce their monthly payments. Almost half of borrowers anticipate delinquency.

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3 Tips for Managing Your Debts Effectively

student-loan-payments-to-resume-debt-repayment-or-basic-necessities
The return of federal student loan payments will inflict havoc on the budgets of borrowers.
  1. Utilize federal loan protections to your benefit.

From the on-ramp period to IDR plans to forbearance and deferment options, you have a variety of options to keep your loans in good standing even if you are unable to make your monthly payment. Contact your loan servicer as soon as possible to determine the optimal course of action.

  1. negotiate expenses such as rent

You may be able to negotiate a rent reduction simply by inquiring. Although the method is not foolproof, it does not hurt to attempt. Other bills that may be negotiable include your cell phone plan, cable and internet service, and medical expenses.

  1. Examine your discretionary expenditures

Taking stock of your subscriptions, determining which ones are worthwhile, and canceling the remainder is a relatively simple way to reduce your monthly spending.

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Source: CNBC

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