It’s Time to Revisit Your Student Loans
Last week, the Supreme Court voted against the White House Administration’s plan to eliminate up to $10,000 of student loans for non-Pell grant recipients and up to $20,000 of loans for Pell grant recipients. This news comes just as the three-year pause on student loans is coming to an end, with loan interest accruing again in September and payments beginning in October.
The Administration plans to propose other types of aid to borrowers, such as reducing the income-driven repayment plan from 10% to 5% of disposable income and not reporting missed payments to credit rating agencies for 12 months. Still, the timeline on these proposals could take months to get approved — so it looks like it is time to prepare for paying back your student loans.
At Warren Street Wealth Advisors, we want you to take the necessary actions to feel confident about your next steps. Start with the considerations below, and feel free to reach out to your financial advisor with any questions.
1. Update your information on studentaid.gov.
Check that your current contact and billing information are up-to-date with the Education Department on studentaid.gov. If you’ve moved, for example, the Education Department will need your updated address to contact you with loan status updates.
2. Determine how much outstanding student loan debt you have.
Work with your loan provider to see how much student loan debt you have remaining and how much the monthly payments will be. Once you know how much to expect each month, it will be easier to manage your spending.
3. Factor student loan payments back into your budget.
Whether you use software to help analyze your budget or the back of an envelope to do your calculations, it is time to add up all of your expenses and compare them to your take-home pay. This will let you know if you will be running a surplus, breakeven or deficit each month going forward.
4. Explore income-driven options.
If you determine you might be at a monthly deficit with student loan payments, an income-driven repayment plan could be an option for you. However, while this option could help your monthly budget, it usually involves you paying more interest in the long-term and extends your payments well past the 10 year standard repayment plan.
5. Shore up your emergency fund.
It’s always a good idea to count your liquid cash savings, especially in a time like this. Having a three to six month emergency fund to fall back on will be important if you have a student loan bill you need to pay again. Now is a good time to start an emergency fund if you don’t have one.
These are some of the most important steps to ensure you make payments on time and know what to expect in the near future when it comes to your debt management. Please reach out if you’d like to discuss these planning points with a Warren Street advisor!
Bryan Cassick, MBA, CFP®
Wealth Advisor, Warren Street Wealth Advisors
Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor
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