How Much Should I Budget Toward Student Loan Payment Based on Income?
Though many borrowers rejoiced over Biden’s student loan forgiveness initiative, as of right now it’s held up in court (the Supreme Court, to be specific) and may not happen at all. Even if it goes through, federal student loan debt is far from wiped out, and millions of Americans are still facing down hefty monthly payments. Although the student loan moratorium has been extended again until June 2023, it will end at some point.
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These details all lead to one burning question, which is particularly hot for those that are new to the workforce or just out of college: “How much will my student loan be based on my income?”
Know Your Loan Inside and Out
It is imperative that borrowers comprehend exactly how much their loan weighs in at every month. It’s pretty simple if you have just a single loan, but if you have numerous loans out, you’ll have to break out the calculator (most likely) to figure out how much you owe in total.
Figure Out Your Budget (With Debt Factored In)
To determine what your student loan payment should be based on your income, you first need to sit down and sort out your budget. To do this, list your total monthly net income (meaning after federal and — if applicable — state taxes) and then use a budgeting method such as the 50/30/20 rule. With this particular rule, you’ll divvy your monthly net income into three spending categories: 50% for essentials, 30% for wants and 20% for savings and paying down debt.
Consider Income-Driven Repayment for Ease of Mind
Income-driven repayment is a solid option for borrowers who are having trouble (even with fierce budgeting) making payments on the typical student loan repayment plan. Once you have your allotted budget for debt, choose either a 20- or 25-year repayment. This makes the process or repayment easier and more effective.
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Use a Student Loan Repayment Calculator
Remember that there are plenty of online resources to help you strategize ways of tackling down your student debt. It’s worthwhile to check out a student loan debt calculator like the one offered by Student Loan Hero.
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