When President Joe Biden first came into office January 2021, he immediately paused the federal student loan repayments for borrowers. Due to the economic upheaval brought on by the global COVID-19 pandemic, many Americans were struggling to pay their bills and stay afloat.
President Biden and Vice President Harris were very passionate about this moratorium, and still are to this day. In fact, it was announced that there would be an extension on the repayments through August 31, 2022. This deadline has been extended more than once, but it’s important to know there will be an end.
For those who are benefiting from this extension, it’s wise to consider this time to get prepared for the transition back into repayments. The Department of Education has resources to help you prepare for when payments resume, such as options for lowering payments through income-based repayment plans.
There have been a lot of changes over the last two years and with that you may also need to update your student loan account information. Be sure to review your loan terms and details and make sure your repayment approach suits your current financial situation
In addition to preparing in the aforementioned ways, it’s important to know how much you will be paying each month towards your repayment. If possible, set aside this amount of money each month in a savings account, which will ensure that you have the funds come August 31st when the extension ceases.
It also happens to be tax time and figuring out where you stand with your tax returns could benefit you in the coming months. Here’s a resource for determining your payoff date – https://www.ramseysolutions.com/debt/student-loan-payoff-calculator.
Importance of Budgeting
Now is as good a time as any to make or even update your budget. In preparation for the end of forbearance, you may want to consider how you can readjust or cut certain areas to accommodate your student loan payment. This is a great time to reevaluate your monthly budget and see where you may be able to cut back in order to have some financial breathing room for the loan payments.
While you’re at it, take some time to consider how and where you should be focusing the money you are able to save. You may need to start building and growing an emergency fund, contributing to a retirement plan, or paying down other high interest debt.
In other words, take this opportunity to consider your entire financial plan, but if this overwhelms you, consider how a Certified Financial Planner ™ can help you create and stick to a budget that works for you and your future.
If you’re considering working with a Financial Planning Professional, contact Tull Financial Group at 757.436.1122. We are a fee-only advisory firm, and a proud member of NAPFA (National Association Of Personal Financial Advisors). We would be happy to talk to you about how we can help set you up for financial success.