What If Student Loans Do Come Back?

by Sahirenys Pierce

What would you do if student loans do come back and the forbearance didn’t get extended? Would you still be able to afford them? For many Americans, the answer would be a straight-up NO. Especially nowadays, with inflation, fears of a recession, and job security hanging by a thread. At this point, how are Americans supposed to prepare if student loans do come back? 

Wish for the Best, Prepare for Student Loans to Return

The best hope is that some kind of student loan forgiveness is passed that regulates predatory loans for education. But that’s our best bet. For people who have student loans that aren’t in the public service, their best bet is for another payment extension. The only problem here is that this won’t last forever. On a last-minute basis, the government has postponed student loans six times over the last few years. This isn’t giving the public enough time to prepare or budget for student loans to come back.

In my personal opinion, I don’t believe student loans will be 100% forgiven for non-public service careers. The chances are very slim to none when you consider our current economy. So to me, it makes sense for them to ask for their money back regardless if you can pay them back or not. Plus where the real money is at is the interest on these student loans that just keep rising due to compound interest. AKA the real student loan killer if I do say so myself. The best thing we can do to prepare for student loans to come back regardless of what the government chooses. This way we’re not caught off guard or stressed out if student loans aren’t forgiven.

What are your Current Financial Priorities

Life has gotten expensive and it has touched a lot of bank accounts in the last few years. Nowadays it’s very common for your finances to be tight, especially during this economy. One of the best things you can do to clearly see your current financial priorities is to review your budget. If you are not a big-budgeter, you can do a quick chicken scratch budget with a pen and paper. You just need to see how much your mandatory expenses are currently costing and if you have any wiggle room.

For some, this current pause can be an opportunity to pay back their loans interest-free. But for others, the math might not be working in your favor no matter how many times you re-calculate it. A real possibility is to look into what financial short-term and long-term options you have available.

Short-Term Options: Economic Hardship Programs

Even though federal student loans are still paused, there is no harm in calling your loan carrier to see what programs they have available. Even before COVID, these programs and extensions have always been around, so don’t be shy. If you are unemployed when federal student loans come back. Then you could benefit from the unemployment deferment program in order to pause your principal and interest payments. If you are going threw a “qualified” financial downturn, you could apply for an economic hardship program. This will help you also avoid principal and interest payments, which is a big deal. Now, not every financial downturn qualifies. In that case, you could also request a general forbearance to pause only your payments for a certain time frame. But be aware that your interest will still be piling up and could increase your debt balance.

Long Term Options: Repayment Plans  

In the long-term, if you’re not seeing a positive boost to your financial situation then an income-driven repayment plan can be an option. Here is a list of the income-driven repayment plans that are currently available:

  • Revised Pay As You Earn Repayment Plan (REPAYE Plan)
  • Pay As You Earn Repayment Plan (PAYE Plan)
  • Income-Based Repayment Plan (IBR Plan)
  • Income-Contingent Repayment Plan (ICR Plan)

Changing your payment plan is a long-term option to help you better prepare and budget for student loans to return. Check out this student loans repayment plan calculator to see which repayment plan best matches your financial situation. 

Closing Thoughts

I personally graduated in 2013 and talks of student loans being forgiven for the masses are still going on. Because of this huge timeframe and our current economic status, I am not betting on the government to do much with student loans. I do believe some immediate reform is needed in the following areas:

  • Federal loan interest rates,
  • Cost of education, and
  • A hard stop on predatory lending to young adults.

My motto has and will still be to count on myself before relying on the government or anyone to save me. This is why I believe it is crucial to take control of your finances and create a game plan to pay off your loans. If you want to learn how my husband and I paid off our student loans check out our debt-free story here.

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