Millions of Americans must start paying off their debt federal student loans October comes again, with average monthly payments of several hundred dollars. To prepare, borrowers are cutting back on expenses, taking on extra work, and looking for options to reduce their monthly payments.
Megan McClelland, 38, said she has started applying for October shifts at a catering company and a brewery to help supplement her income.
McClelland’s main job is as a counselor at Petaluma High School in California.Over these three years, payments Suspended due to epidemic, she paid off her car loan and had savings for the first time. She would put the $235 she spent on the car payment toward her student loans, but that would still leave about $270 that she would have to reallocate or earn.
“It’s been a relief to not have the financial burden of the past few years,” she said. “Over the next few months, I’ll be thinking about where I can cut back on my budget. Maybe less eating out and more side hustles.”
Justin Cole, 35, of Little Rock, Ark., said he didn’t know how he would repay the $166 he owed each month starting in October. That’s the estimated payment on a roughly $19,000 loan he took out more than 10 years ago to pay for college.
“I’m already deeply in debt, and although I just got a raise at work, it won’t go into effect until my family practice is full,” he said.
Cole worked at the front desk of a medical clinic, checking in patients, processing records and managing payments. Some of his other debts stem from medical bills after a car accident early in the pandemic.
“If these loans are forgiven, I can finally work on improving my credit and actually save money for once,” he said. “I would be ecstatic if they were suddenly forgiven.”
The Supreme Court struck down a plan from President Joe Biden’s administration in July Wiping out $400 billion Student loan debt.
Currently, Cole has applied to adjust his payments under the new SAVE plan and previous income-driven repayment options, which are listed on his account as being processed and “under review.” SAVE, or Saving for a Valuable Education, allows borrowers to make lower payments based on a percentage of their discretionary income.
His main household expenses are “rent, car payments, groceries and utilities — just like everyone else,” he said.
It’s unclear how a sudden loss of discretionary income for millions of people might affect the economy.
On an earnings call last month, Target Corp.’s chief financial officer said restarting student loan payments would “put additional pressure on the already tight budgets of tens of millions of families,” as did the finance chiefs at Best Buy and other companies also expressed the same view. Retailers.
in the fed. latest economic surveyA restaurant industry observer in Boston says workers are working longer hours and credit card debt has topped $1 trillion for the first time. More than half of student loan holders have added credit card debt during the pandemic, according to credit bureau TransUnion. Meanwhile, consumer savings peaked in 2021 and are now declining.
McClelland is eligible for public service loan forgiveness As a public school teacher, next March he will have been in the field for 10 years. She is taking out a loan and hopes to have it canceled next year. The program eliminates remaining debt for federal student loan holders working in the public service with a 10-year repayment period.
“I only have six payments left, but it’s still stressful,” she said. “Starting next month, I have to find about $500 a month to pay this payment that I haven’t received in a long time.”
The Public Service Loan Forgiveness Program is one of several relief avenues still available to many people with student debt. After Biden’s original clemency plan was blocked by the Supreme Court in July, the White House said it would use the Higher Education Act Cancel to more borrowers. It is currently undergoing a process known as “negotiated rulemaking” to iron out the details of the plan.
Other sources of relief for borrowers include: False authentication, Borrower Defense, school closed, Discharged with total/permanent disabilityas well as alternative repayment plans such as Income driven repayment.
McClelland said she now spends a lot of time counseling high school students on how to avoid taking on burdensome loans.
“I had no financial guidance from my parents or school when I was young,” she said. “I never understood the long-term effects.”
Despite working while in school, including part-time jobs and consulting at Starbucks, wineries and restaurants, McClelland still has a debt balance of about $38,000, including a $10,000 original loan for her undergraduate studies and Sonoma State $40,000 loan for the university’s master’s degree in counseling. .
“I knew I wanted to go to college, but my parents didn’t have the money,” McClelland said. “I always openly tell kids, ‘As someone who’s been in your situation, I highly recommend finding a way to avoid a loan.’ When you’re 17 or 18, you think, ‘Oh, sure, I Will solve this problem. “Then it’s frustrating to still be in this financial situation.”
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