According to a Consumer Financial Protection Bureau report from June, one in five student loan borrowers may face difficulties when these federal student loan payments restart.
As federal student loan payments are set to resume in October, concerns arise, especially for those already struggling with credit card debt
However, the initial 12-month period from October 1, 2023, to September 30, 2024, provides a buffer missed payments won’t lead to defaults or credit score drops. Still, interest will accumulate, making the debt harder to manage. Experts recommend consistent federal student loan payments during this period to save money and reduce debt faster.
To navigate this challenge, consider creating a revised budget to identify funds for repayment. Review financial statements to find areas to cut back. Prioritize essentials like rent, utilities, and transportation and work towards a $500 emergency fund to prevent further debt.
Experts suggest focusing on either student loan or credit card debt. While making all federal student loan payments is crucial, directing more funds towards high-interest debt can expedite progress. For credit card interest reduction, explore balance transfer cards with low or 0% introductory rates and minimal transfer fees.
For multiple credit card balances, consolidating them with a low-interest fixed-payment personal loan can be beneficial. In cases of financial hardship, inquire about credit card issuers’ hardship plans, which may temporarily reduce interest and waive fees.
Regarding federal student loan payments, consider income-driven repayment plans based on income, family size, and financial goals
There are four plans available, each with unique advantages. Switching to a suitable plan can help manage debt effectively. If making headway with debt is challenging, consulting a nonprofit credit counseling agency can be beneficial. Credit counselors can assess your financial situation, create a budget, and potentially offer debt management plans, including consolidating credit card balances at lower interest rates. Additionally, they can provide guidance on selecting the right student loan repayment plan.
To maintain financial discipline, avoid adding new purchases to your credit cards once you’ve lowered your debt costs. Consider switching temporarily to a debit card or cash for transactions. By managing your finances wisely during this critical period, you can better handle the impending resumption of federal student loan payments without derailing your financial stability.