Develop a student loan debt repayment plan

Student loan debt repayment is a political hotspot. Regardless of your position, we may all agree that college loan debt itself is an economic burden for millions of Americans in almost all adult age groups.

If you are one of the 45 million Americans who are paying off college loan debts, you may have delayed buying a home or starting a family. If you are about to turn 60 and are still paying for a second degree or taking a loan for your child’s education, you may not have saved much for retirement.

Among the recent graduates, 92% of the 2016 college graduates applied for student loans, and the average debt owed was still slightly more than US$30,000. National Education Statistics Center. This U.S. Federal Reserve It is estimated that by the end of 2020, student loan debt will be $1.7 trillion.

No matter how much you owe, you may hope that there will be some permanent federal relief after September 30, 2021, when Suspend payment of loan duePresident Joe Biden promised to forgive debts during the campaign, but the $6 trillion federal budget proposal announced in the last week of May did not make any provisions to ease university loans.

This worries some supporters, but others say it is a good sign because the president may still be considering an executive order to cancel at least $10,000 per loan. This is a far cry from the $50,000 promoted by progressives.

Reduce student loan debt, all or $50,000?

Reducing personal student loans by $50,000 will obviously reduce the arrears significantly, and the plan is still under discussion. Eliminating all such debts will free millions of citizens from financial burdens and allegedly open up new opportunities for financial growth and stability.

Although loan payments have been suspended until September, it is important to remember that they still exist. When the population is vaccinated and the economy fully recovers, loan payments will restart.

What can you do now?

If you owe student loans, you should consider what you will do if the loan waiver becomes a reality, or if it is October 1st, you will repay the same monthly payment. some advices:

  1. It’s great to deposit extra money in your bank account every month, because you don’t have to repay the loan. If you haven’t put the money aside yet in anticipation of starting payments again in the fall, start now. In fact, if you can double your reserved funds, then do so. If the loan is restored to its pre-COVID terms, you will have a good change to repay the loan. Obviously, if you lose your job due to a pandemic, it will be difficult.
  2. If the $50,000 return plan is passed, your loan may be wiped. The money you save to resume payments can be invested in a retirement plan, used to pay for a home down payment, or to pay for a credit card. If you owe much more than $50,000, you can still pay off a large sum of money, and you can use the money you keep to increase it.
  3. In the unlikely event that the federal government wipes out all student loan debt, you will be able to use all the funds you set aside for student loan payments as a windfall. To avoid letting these savings go away, keep your budget the same as the amount you paid for student loans, pay more for other debts, establish an emergency fund, deposit money for the housing down payment or put it in your retirement account.

What’s the problem?

There are many arguments against the proposal regarding student loan forgiveness, and the arguments come from both sides of the issue.

It has been pointed out that for many Americans with outstanding student loans in the six-figure range, the $50,000 relief is not enough.

At the same time, some people say that it is inappropriate to discuss any student loan forgiveness because it punishes all those who manage to pay off loans without federal assistance.

The $50,000 debt forgiveness fee for all applicable cases is estimated to be $1 trillion. If Biden tries to issue such a large-scale executive order, it will be the most expensive executive order ever issued, and it may face legal challenges, not just from the for-profit company that originally issued the loan.

How the plan evolves

During his presidential campaign, Biden suggested that he seek a $10,000 student loan waiver for all borrowers, and some members of Congress still support this. But Senator Elizabeth Warren (D-Mass.) spearheaded a campaign to grant $50,000 forgiveness to all student loan holders, and Senator Bernie Sanders (D-Vermont) strongly supported the exemption of all student loans. debt.

Since the Democratic Party has a majority in the U.S. House of Representatives and a minority in the U.S. Senate, the atmosphere for achieving one of these three goals is at its best. However, not all Democrats agree. Biden has asked his Secretary of Education to determine the legality of a presidential executive order to reduce all student loan debt, but Congress may pass a debt relief bill.

other options

There are other suggestions for student loan forgiveness, focusing on specific groups of people:

Consider age

Twenty years ago, the Government Accountability Office determined that 3% of households headed by persons aged 65 or over maintained a student loan balance, and this proportion has increased over the next 20 years. In some cases, these loans may come from people returning to school to study for a second degree, or from loans obtained for the education of their children.

Some people suggest that the government can cancel all debts of all students 65 years of age or older. This will affect approximately 2 million Americans.

Consider career

Due to the coronavirus pandemic, a new initiative has emerged to cancel student debts of doctors and nurses or other health professionals. It is estimated that 1 million health care workers will benefit from eliminating student debt.

Consider income

It has been proposed to set a maximum income level for student loan relief. In some cases, the conversation is about people with an annual income of less than US$100,000 to US$125,000, depending on what you read, while others recommend waiving loans for people with an annual income of less than US$50,000.

Depending on a person’s occupation or other factors, there are other ways to obtain student loan relief.Provided by the U.S. Department of Education Information about these opportunities, Also about Debt relief for borrowers with permanent disabilities.

Move forward

The issue of student debt loan solutions will be suspended until October 1, and there may or may not be much discussion about college debt between now and then. This is part of the reason if you have student debt, you need to consider what the amount will be when that date arrives. However, if you can set aside these loan repayments, your financial situation will be much better.

Kent McDill is a senior journalist who has been focusing on personal finance topics since 2013. He is a writer for The Penny Hoarder.

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About the Author: Agnes Zang