“38% of Millennials said that they are currently paying off their student loans.” – Educationdata.org
It’s clear that student loans are impacting the lives of millennials, so it’s important you stay up to date on what is going and what changes are/could be coming.
As of today, no official changes have been made to student loans. Forbearance is still set to end on August 31, 2022. Will that happen or will it get pushed off again? Nobody knows at this point, but it does seem that something is going to happen.
On May 28, stories started coming out that White House officials are currently planning to cancel $10,000 in student loan debt per borrower. This would be applied to anyone making under $150,000 a year if single, or $300,000 a year if married filing jointly. It is important to note that some of these specifications could easily change over the coming weeks before this gets enacted. So what should you do now as we await forbearance to end and also to hear about forgiveness? We have to look at it from two different angles.
If You Have Greater Than $10,000 In Loans
If you have more than $10,000 in student loans, you have a few options. I would first use your extra dollars to build your emergency savings, pay off other high interest debt, private student loans, etc. If you have all of those taken care of, I would then start saving your monthly student loan payment in a high yield savings account so when forbearance ends, you can throw all that money down on what you have left of student loans. This route gives you flexibility since you will have these funds available if anything unexpected were to happen, while also not putting you behind by spending the dollars.
If you’re the type who will spend those dollars as soon as they become available, pay down your student loans. However, you don’t want to pay them down below $10,000, though, because that looks to be the amount that will be forgiven.
If You Have Less Than $10,000 In Loans
If you find yourself with less than $10,000 in student loans, do not do anything. You can save the cash available just in case, but don’t pay towards these loans since they might get forgiven. There is no reason when you could be using those dollars somewhere else for something more advantageous.
As of now, the news is looking positive for those with student loans, but we are still waiting to hear the confirmation that $10,000 of student loans will be forgiven unless something changes. Just know that this will most likely get challenged even if it gets enacted by Biden so there is no guarantee this goes through!
I will continue to keep you updated on this over the coming weeks and months as I know it impacts many of you!
As always, if you need help creating your financial plan, we are here. You can book a free first meeting with this link.
Disclaimer: none of this is advice, it is just for informational purposes. Talk with your financial planner before implementing any of these strategies.
