Millions of student loan borrowers from Columbia University in Harlem to USC who hoped some of their loans would be paid off by the U.S. government are now considering Plan B.
Last week the U.S. Supreme Court ruled the president couldn’t unilaterally forgive the loans.
Not only will borrowers have to pay off the loans, payments – suspended for three years because of the pandemic – resume next month. Borrowers who spent the money they would have paid instead of banking it could be in for a rude awakening.
“We understand the disappointment felt by millions of borrowers who were hoping for relief,” the National Foundation for Credit Counseling (NFCC) said in a statement. “We encourage students to explore affordable repayment options and seek guidance to meet their financial obligations without defaulting. The NFCC remains committed to providing student loan borrowers with the guidance and tools to navigate their financial futures.”
But what should borrowers do to make sure their resumed payments don’t place them in a financial bind? Taylor Kovar, a certified financial planner and CEO of The Money Couple, says the first step is to take a close look at your budget.
Here’s some advice
“The goal here is to understand your income and expenses in detail,” Kovar told ConsumerAffairs. “Knowing where your money goes can help you find potential areas to reduce and re-allocate to student loan payments. Remember, you can’t manage what you can’t measure, so without a clear understanding of where every dollar is going, you won’t be able to prioritize these payments.”
Kovar also said borrowers should reach out to their loan servicer and be candid about their financial position. He says loan servicers often have multiple repayment plans and some borrowers might qualify for an income-driven repayment plan, which would cap monthly student loan payments at a percentage of discretionary income.
“Consolidation could simplify your payments if you have multiple student loans, which can sometimes reduce your monthly payment,” Kovar told us. “Refinancing, on the other hand, might be beneficial if you can qualify for a lower interest rate, which could help lower your monthly payment.”
Ask for help
If you find yourself in severe financial difficulty, Kovar says community resources can be a lifeline in difficult financial times. Taking advantage of services from a credit counselor may provide some ways to better manage your debt.
Non-profit credit counselors charge low or no fees and can provide valuable advice tailored to your particular circumstances.
Our partners at the ConsumerAffairs research team have collected thousands of verified reviews about credit counselors here.
According to various sources, 45.3 million borrowers have federal student debt as of the second quarter of fiscal year 2022. President Biden last year signed an executive order to forgive up to $20,000 for each borrower.
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