How To Handle The "Pause" or "Pay" Of Student Loans Payments
You’ve seen the headlines about Student Loans. Rather the pause will continue or would the payment will start on whichever the date. This cliffhanger leaves Millions are waiting to see what Robinette is going to do about Student Loans. Many of us purchased a ticket to a new way of life financially with student loans and didn’t know it would become a horror movie. The reviews have been tomato. tomato. While I do recommend college, I do no recommend the current student loan system.
Historically President Biden or Robinette has waited until the 11th hour to state if he was going to extend the student loan payment pause; I’ve called this out like an operator throughout the pandemic. It’s rather annoying, but it’s to be expected. No matter if you’re reading this when loans are paused again or payments are back in unfortunate style, I wanted to give context on how to handle both. What behooves me is that we see headlines off a ‘possible’ cancellation or this school for a select yet not a massive change. While there are 58% of American who feel that forgiveness will make inflation worse; who are those that are being interviewed? I digress.
While statistics prove that canceling student loan debt would impact the economy more than this newly minted Inflation Reduction Act, the other argument that we are now hearing is how it would impact those companies themselves. I went on a bit of a rant about how there are many layers that come into play with student loans - from interest to PSLF to certain institutions getting relief. While the Act would impact us overtime, imagine how much of your finances would open up if there weren’t any loans. Yet, I know some that already made it to debt-free on the loans would be annoyed —- they would understand the struggle.
Oh, sorta breaking/ 'they thinking about' news. White House officials + Robinette are reportedly leaning toward canceling up to $10,000 in student loan debt for borrowers who make less than $125,000. You know that they have said this before. We shall see. To read the article about this, click here. But they had to say something - midterms are close. Forgiving student loan debt will cost between $300 Billion and $980 Billion over 10 years, according to a new analysis published in Bloomberg. But imagine how much interest and goal set back it would cost those that aren’t forgiven for loans that didn’t give them leverage? Such a layered situation.
Also, why did they land on $125K as the income threshold for single income and $250K for families, my thoughts is based upon the data that they gained about those that take out student loans and are impacted. But there are plenty in higher earning jobs that are struggling with loans. So many layers when it comes to this. This system has so much issues within it! Here’s what I was about to find about income levels. But this was the same income levels for stimulus if I recall; so many questions with no answers being given.
Update: As of 8/24, President Biden/Robinette has released that student loan payments have been pushed back to December 31st beginning January 2023. But that White House officials are planning to cancel up to $20,000 in student debt for recipients of Pell Grants. If you make under $125K, up to $10K of your loans will be forgiven. Robinette and WH are expected to roll out a new, more generous income-driven repayment plan -- already in the works at Ed Dept -- that would cut monthly payments in half for undergrad borrowers which was in Biden campaign promise (from 10%, to 5%). Read more here.
Here’s a solid article that will give you insights on what loans qualify and don’t.
The promise is getting a silent pivot and continuously waiting until the last minute to tell Millions of people what you’re going to do is cruel.
So let’s talk about what to do in either case:
Before any scenario:
Locate your loans. Make sure that they have accurate information. You would be surprised how many loans have gotten passed around like a plate of food. Different companies use different systems. Account balance, Repayment types can be changed.
Make a plan that you can run no matter which way we have to move. Don’t get caught into the decision, just know what you’re doing after it.
Look at your budget to know what option works for you, no you forgiven yourself isn’t one. LOL
They are “paused” again:
Rejoice. But take a peep to make sure your creditor has NOT added any interest to your balance. If they did, call them on it.
Peep the ‘date’ this next round is supposed to end. Make a plan for what you would do. You could even set up a sinking fund to stack and do a massive payment during this pause or before the real end. We know this is going to end one day - either in cancellation or running that payment. With that latter, we don’t know how the creditor would act. I would use a HYSA for a sinking fund ( I recommend Ally, Marcus, Capital One for them - higher APY).
You can take that ‘payment’ to stack towards that sinking fund for later and/or pay down other debt. Look to see what debt you have (how much, interest, terms, etc) - like I said when all this started.. Plan this pause.
You can do like I told Bloomberg, invest a portion of it. Yeah, I told them that. I still did throughout. Also, some of those sectors did what I said they would do.
Look at forgiveness programs to see what you can get aligned. Don’t let Robinette hold the power, Google and get help. Oh, PSLF ends October 31, 2022. Here’s the link to learn more and get aligned.
They are back in “pay”:
You know that budget that you talked about? See what you can swing. More than likely they will start you back on what was your payment before the payment pause. IF that doesn’t align with your budget (I mean, inflation is high AF) - peep out Forbearances. There’s different types: Financial difficulties, Medical expenses,Change in employment,Other reasons acceptable to your loan servicer. Find out about them here along with seeing which you can align with.
Changing your payment plan. If what you’re doing isn’t working for your bag (budget) - configure another way. Here’s more about that.
Don’t be afraid to ask for a shift in interest or consolidate for a better rate. Think of it like refinancing, but be very mindful of the terms and how to align with your budget.
Don’t allow this to stress you or your budget out. Easier said than done, yes, but this system needs milk.
Update: 10/17 Link to the form, Content overview of the form
Key dates when it comes to Student Loan Forgiveness:
October 31 2022 - PSLF Application Deadline
November 15, 2022 - Deadline for the application; Expecting more than 4-6 weeks processing
December 31, 2022 - Deadline you can request refunds on any voluntary payments you made on your fed loans
January 1 2023 - Interest will begin accruing again on the remaining balance and regular payments will resume and your payments will come out of pause
December 31, 2023 - Final deadline to apply for student loan forgiveness
Additional Content References:
Why did the forgiveness threshold move - Reel
The ‘reimbursement’ for payments during payment pause - TikTok
As we wait to see what this decision is going to be, take what you feel might help you and your situation. Like you, I truly wish they would cancel at least some of the loans. Yet, we move (forward).
Check out my YouTube Video walking you through this process along with some thoughts I have about it.
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