NEW YORK – Millions of Americans must begin paying off their federal student loans in October, with monthly payments averaging in the hundreds of dollars. To prepare, borrowers cut back on expenses, work more jobs and look for options to lower their monthly payments.
Megan McClelland, 38, said she started applying for shifts in October at a food service company and a winery to help supplement her income.
McClelland’s primary job was as a counselor at Petaluma High School in California. After more than three years of suspended payments due to the pandemic, he paid off his car loan and saved for the first time. You pay the $235 you spent on your car payment toward your student loan, but that still leaves you with about another $270 that you need to reallocate or earn.
“It’s been a huge relief the last few years, not having that financial burden,” he said. “In the coming months, I will see how I can reduce my budget. “Maybe I’ll go out to eat a little and look for more jobs.”
Justin Cole, 35, of Little Rock, Arkansas, said he doesn’t know how he’ll come up with the $166 a month he’ll have to pay starting in October. That is the estimated payment for his approximately 19,000 loans to pay for college more than 10 years ago.
“I’m already in a mountain of debt, and even though I got a raise, it won’t take effect until we fully staff my family medicine clinic,” he said.
Cole works at the front desk of a doctor’s office: registering patients, managing records, and overseeing payment collection. The rest of his debt is due to medical expenses due to a car accident early in the pandemic.
“If those loans are forgiven, I can finally work to improve my credit and save money for the first time,” he said. “If they are condoned forever, I will be happy.”
In July, the Supreme Court rejected President Joe Biden’s administration’s plan to eliminate $400 billion in student loans.
Currently, Cole has requested changes to his payments based on the new SAVE plan and previous income-based payment options, which appear to be in process and “under review” in his account. The SAVE plan—an acronym for “Savings for a Valued Education”—allows borrowers to make lower payments based on a percentage of their discretionary income.
Her main household expenses are “rent, car payments, food and utilities, the same for everything,” she said.
It’s not yet clear how millions of people who suddenly have less discretionary income will affect the economy.
In an earnings conference call last month, Target’s chief financial officer said continuing student loan payments “will put additional pressure on an already depleted budget of tens of millions of dollars.” home,” a sentiment echoed by finance chiefs at Best Buy and other retailers.
In the Federal Reserve’s latest survey of economic conditions, a restaurant industry analyst in Boston said workers are putting in longer hours and, for the first time, credit card debt has topped $1 trillion. . According to credit bureau TransUnion, more than half of student loan holders have incurred credit card debt during the pandemic. Meanwhile, consumer savings, which peaked in 2021, declined.
McClelland qualifies for Public Service Loan Forgiveness as a public school teacher because he will be working on the farm for 10 years next March. You take out your loans to, you hope, get that payment next year. The program erases the remaining debt for those who have federal student loans, work in public service and make payments over 10 years.
“I only have six bills to pay, but it’s still stressful,” he said. “I need to make about $500 a month starting next month to make this payment which I haven’t had to do in a long time.”
The Public Service Loan Forgiveness program is one of the many forms of relief still available to many people with student loan debt. After the Supreme Court struck down Biden’s original plan to forgive the loans in July, the White House said it would use the Higher Education Act to achieve cancellation for more borrowers. It is currently in a process called “negotiated rulemaking” to determine the details of that plan.
Other sources of relief for borrowers include: false certification, borrower defense, school closings, total/permanent disability discharges, and alternative repayment programs such as income-based repayment.
McClelland, for his part, says he now spends a lot of time advising high school students on how to avoid taking on heavy loans.
“When I was young I did not receive financial guidance from my own parents or from school,” he said. “I don’t even understand the long-term effects.”
Despite working while in school and since then — with additional jobs at Starbucks, wineries and restaurants, in addition to consulting — McClelland still carries approximately $38,000 in debt from her original $10,000 loan. to the student. State University.
“I knew I wanted to go to college and my parents didn’t have the money,” McClelland said. “I openly tell the children all the time, ‘As someone who was in your shoes once, I highly recommend finding a way to avoid taking out loans.’ When you’re 17 or 18, you think, ‘Oh, sure, I’ll find a way.’ So it’s disappointing to still be in this financial situation.”