Federal student loan payments are now set to resume on Sept. 1, and even though that’s giving borrowers a temporary sigh of relief, with inflation high, it’s sure to create a perfect storm for student loan borrowers when payments resume. A recent survey conducted by student loan resource Savi and the Student Debt Crisis Center found that 92% of fully employed student loan borrowers are worried that rising costs will make it harder to afford their payments, and 1 in 3 borrowers say they cut back spending on necessities like food, rent and healthcare in preparation for payments to restart.
Here’s a look at how borrowers can start prepping now to begin making payments on Sept. 1, without making sacrifices on essentials like food and housing.
Look Into Your Repayment Options
Many student loan servicers have either ended their contracts or are in the process of transferring their loans to a new servicer, so you may not even know where you will be making payments in September.
“If you are uncertain who has your loans currently, you can log in to studentaid.gov to see your currently assigned servicer(s),” said Aaron Smith, co-founder of Savi. “Once you know your servicer, log in to your servicer’s online portal to see what your monthly payment is going to be. If it is not manageable for your budget, you could consider enrolling in an income-driven repayment plan to reduce the monthly payment obligation.”
Now is also a good time to see if you qualify for student loan forgiveness.
“Borrowers in the public sector will want to check to see if they are eligible for Public Service Loan Forgiveness, given relaxed regulations from the Department of Education through Halloween of this year, and sign up accordingly,” Smith said.
Look For Ways To Reduce Nonessential Costs
Due to inflation, it’s harder than ever for many borrowers to find room in their budget for student loan payments.
“The price of goods, services and travel have all increased in the past year,” Smith said. “In our recent survey, over one-third (37%) of responding borrowers are preparing to resume payments by reducing spending on necessities such as food, rent and healthcare. As other public health policies connected to COVID such as testing and vaccination efforts wind down across the country, we can only imagine this will continue to strain Americans’ personal budgets on these necessities.”
Before resorting to cutting back on money needed to cover groceries, housing and healthcare, look for other ways to cut costs.
“Look at reducing or eliminating unnecessary expenses and discretionary spending,” said Emily Koochel, PhD, senior financial planning education consultant at eMoney Advisor. “One area often overlooked is automated subscriptions. There are several free apps that can help identify these subscriptions – and cancel what you don’t need.”
You should also renegotiate any fixed expenses.
“Negotiate on the things such as cable and internet,” said Michael Cocco, financial professional at Equitable Advisors.
You may also be able to cut back on necessary expenses, like food and health or auto insurance, by paying careful attention to how much you are spending and looking for ways to cut back.
“Review your fixed spending items to determine if there is any room for reduction in these categories, such as groceries,” said Cassandra Kirby, CFP, EA, partner, COO, CCO and private wealth advisor at Braun-Bostich & Associates. “Can you reduce spending on food by pre-planning meals and/or purchasing items on sale, or shopping at lower cost providers? Can you contact your insurance providers to ask if there is any way can you save on premiums?”
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