Don't Let Student Loans Spook You!

This week many of us celebrate Halloween.  No doubt we’ve been tricked in 2020 so hopefully the kids can have a treat on Saturday!  We all need it. In this blog I’d like to discuss a scary turn of events.  Your student loans are coming due.  If you’ve enjoyed a reprieve from those government backed loans because of the CARES Act and didn’t have to pay since March your time is coming short.  In January you will need to begin paying them back.  Don’t let this haunt you! Let’s get a game plan so you are ready.

First things first. Let’s zoom out and take a look at the past 8 months. Where has that money you would have paid to the loans gone? Did you save it? Did you put it toward other debts? Was your household affected by the mandatory shutdown and you simply needed that money for regular bills? Regardless, getting a feel for where your money stands is a good start.

Next, we need to add your student loans back into the budget for November. Yes I know they are not due until January but doing this now will allow you to get adjusted to paying it again. Depending on your circumstances, you can even use November and December funds for Christmas gifts. Then come January you are able to change the title to Student Loans so that bill gets paid normally. If you are currently experiencing hardship due to this pandemic, call your student loan financial institutions to discuss other options. This would be either a deferment or forbearance. With either option you can have more time without payments (usually 6 months). But if you qualify for a deferment you won’t need to pay interest during that period.  

Another option to consider in January is a student loan refinance. If your interest rate is over 5% and you have a good credit score you should probably look into refinancing your student loans.  I’ve seen several clients reduce their interest rate down to 4% or less recently.  This is a great deal if you are on the path to paying off your loans and your job is pretty stable.  Let’s get those loans gone and lowering your interest rate can help that process go faster.  Check out the company I recommend for student loan refinancing for a quick quote here...

For those of you with college-bound children listen up!  Now is the time to ensure they don’t make the mistakes we did.  I graduated with lots of student loans.  When my husband and I consolidated them, the minimum monthly payment was $451.21.  We paid it off in under 5 years but I definitely don’t want that burden for my children.  Let’s help our kids prepare for college and reduce the financial stress that could come later. Here are a few things to consider on that journey:

1. Know your child and the gifts they have.  This helps as you choose schools and majors.

2. Discuss how you can help them early.  It is ok to let them know you will only contribute half the amount but be clear.

3. Think outside the box.  Not every child needs a college education. Your child may flourish in a different setting and still be successful in earning a good living.

Want more information? Join me as we dive into preparing for college financially.  I will host a webinar on Thursday November 5th at 8pm EST.  You will learn the ins and out of how to prepare financially for college from the perspective of a financial coach.  Don’t get trapped into the expensive commitments of the college years. Register here for just $15.