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Writer's pictureKen Michaels

The Student Loan Debate: How Repayment Restart Will Impact Borrowers

Student loan forgiveness has been a topic of debate for years. Many have argued that forgiving student loans would ease the burden on borrowers, stimulate the economy, and create a fairer education system. However, the landscape of student loan forgiveness is changing, and with the supreme court ruling against Bidens one-time loan forgiveness plan, you may have to start paying your loans back as soon as October 1st. Here is how you can prepare to pay back your student loans and the pros and cons of doing so.


The Key Date

In recent times, student loan forgiveness programs have been a big political debate, with proposals ranging from partial debt relief to complete forgiveness. However, changes in government policies and shifting priorities have led to a reevaluation of these programs. Recently the United States Supreme Court ruled against President Bidens one-time student loan forgiveness plan. With the ruling students are now required to begin repaying their student loans beginning October 1st.


What Does This Mean For Students?

Since March 2020, students have been granted the ability to defer their student loan payments as a result of Covid-19 pandemic regulations. This temporary relief has provided students and graduates with three years of additional disposable income. However, with the recent Supreme Court ruling it will initiate a shift in their financial circumstances. The extra funds that were once used for luxury spending must now be redirected toward loan repayment obligations. This unexpected change may come as a surprise to individuals who had anticipated loan forgiveness.


A Positive For Your Credit Score?

One of the most frequently asked questions revolves around improving credit scores. Many individuals, particularly recent college graduates, have limited or no credit history, presenting an opportunity to build it. A few of the key factors in building a credit score are the length of credit history and the amount of credit utilized. Making timely payments is crucial for individuals looking to establish a solid credit history. Student loans, often repaid over several years, offer an excellent opportunity to do so. However, it is essential to consider the consequences of not paying your loans on time. Financial struggles and a negative impact on your credit score can result from delinquent payments, defined as payments that are 90 days past due. Therefore, it becomes imperative to evaluate your financial plan and find ways to incorporate your loan payments effectively within your budget.


Reevaluate Your Financial Plan

As the deadline for student loan repayment approaches, it's crucial to revisit your financial plan. For many individuals who haven't made payments in over three years, the extra dollars likely went towards luxury spending, dining out more frequently, or even purchasing a newer vehicle. However, with student loan payments back in full swing, managing these added expenses can be challenging. Now is the time to evaluate your overall financial situation and establish a well-balanced budget that aligns with your lifestyle. This entails examining your expenses, savings, and income. If you haven't done so already, consulting with a financial advisor can provide valuable strategies to implement a sound financial plan tailored to your needs.

 

If you find yourself in need of assistance after reading this, please don't hesitate to reach out. I am here to help and am happy to assist you with any planning-related questions you may have.


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