Pursuing higher education and attaining a degree is something no one can ever take away from you. But it might be hard to look on the bright side when you’re saddled with thousands of dollars in student debt. In efforts to alleviate the burden, President Joe Biden launched a new student loan plan that would forgive up to $20,000 in student loans.
According to Nerd Wallet, 45 million Americans have student loan debt (or one in five adults). Student loan payments and interest have been suspended since March 2020 and are scheduled to resume in June 2023. Under Biden’s plan, you could qualify to have your payments paused permanently or benefit from reduced monthly payments. But lawsuits challenging the legality of the forgiveness program have put it on pause.
With the Supreme Court slated to hear deliberations in late February, it’s a good idea to make sure you’re prepared:
1. Budget in your repayment
Budgeting is key to ensuring you’re not overspending each month and racking up more debt. Start by listing out all your monthly expenses as well as your monthly take-home. If you’re tight on money, try eliminating any expenses you don’t really need, like eating out or going to the movies.
If you have credit card debt in addition to student loan debt, make sure you’re staying on top of your credit cards. Finally, add your student loan payment to your budget, even if you’re not currently paying on it.
2. Set aside savings
Putting a certain amount away each month is critical to financial health. The 80/20 rule advises putting 80% of your monthly take-home toward your monthly bills and 20% into savings. Since your budget now accounts for your student loan payment, put the amount away into a separate student loan savings account to safeguard yourself for when payments resume.
3. Talk to a professional
If you’re already struggling with debt and are worried about how you’ll manage if your repayment resumes, talking to a certified credit counselor can help. During your appointment, they may also recommend you enroll in a debt management program. If you qualify, your counselor will work with your lenders to lower your interest rate and combine your unsecured loans (personal loans and credit card debt) into reduced monthly payments to be paid off in three to five years.