Federal Student Loans: What You Need to Know
Debt, Loans, Student Loans, Students
July 20, 2023
In late June we got word that the Supreme Court struck down the Biden Administration’s proposal to forgive $10,000 in federal student loans for qualified borrowers (and up to $20,000 for Pell Grant recipients).
And that comes on the heels of another move in Washington that is putting an end to the loan repayment hiatus that has been in place for more than three years.
Ever since March 2020, in response to the financial shock of the Covid pandemic shutdown, the federal government has allowed federal student loan borrowers to forego making monthly payments and froze their interest rate at 0%.
As part of the recent Congressional agreement to raise the federal debt ceiling, this break on student loan repayment will permanently end. Beginning Sept. 1, interest will start accruing again on all federal loans, with repayments beginning October 1. If you had stopped making payments, you need to get ready to start back with repayments come October.
Stand in Your College Debt Truth
Please don’t ignore this looming big change to your cash flow.
Now is the time to look at your finances and make sure you can afford to cover your loan payment. You have a few months to readjust your spending so you won’t fall behind on your student loans. Don’t squander this time. If you are worried about covering your payments, focus on wants vs. needs.
I so want you to be able to take the more expensive vacation or shell out money for concerts. Or get your own place. But those are wants, not needs. Sharing a place with friends, or living back at home are options to consider.
I understand how frustrating the Supreme Court’s decision is. But that’s the law, for now. So right now it’s all about standing in your financial truth and getting ready to restart your student loan repayments this fall.
Suze's Financial Strength Test
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.
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