Financial advisor discusses return of student loan payments
COLLEGE STATION, Texas (KBTX) - Millions of borrowers will begin paying back their student loans after a three-year pause that began during the pandemic ended on Sunday.
According to the Biden Administration, more than 45 million borrowers owe approximately $1.6 trillion in student loan debt. Over the summer, the Supreme Court ruled against the Biden Administration Student Loan Forgiveness Plan which meant there would be no relief for those millions of borrowers. Now, some borrowers will have to find new ways to balance their budget with part of their income going towards a new expense.
Josh Landman, a financial advisor with Edward Jones, said there’s potential that more people will need financial advice now that payments have resumed.
“Clients are all shapes and sizes that we work with, but for students that are fresh coming out of A&M, it’s pretty common to have student loans and come up with a plan on how we’re going to attack it,” Landman said.
The Department of Education College Score Card shows that undergraduate borrowers who attended Texas A&M University have a median total debt of $18,000 with typical monthly payments of $189.
While those payments might hurt Americans’ wallets, Dennis Jansen, Director of Texas A&M’s Private Enterprise Research Center, said those issues should be short-lived given the state of the economy.
“There has not been a big rise in unemployment. The feds have done a job, sort of, to slow inflation. Although we are still running above two percent, I think the economy is in a good place,” Jansen said.
Jansen said that while the economy might struggle at the start due to fewer people spending money at restaurants or traveling, he believes it will be better off in the long run.
For those who might struggle to pay their bills, Landman said a budget is an excellent way to start finding a financial balance.
“You gotta know where you’re at so just look at your take-home pay and your average monthly expense,” Landman said. “For me and my wife, it was nobody likes to do a budget, but the first time we did a budget together, we wrote down our big expenses each month.”
Part of that budget is also determining what is needed versus what is wanted, Landman said.
“I know for everybody out there going to Target feels like it’s a need, going to the dollar section, but is it really I don’t know about that, so figure out your needs versus your wants,” Landman said.
Making payments automatic can also help individuals keep track of their important payments as well as pay them on time, Landman said.
Borrowers have the option to wait a year and begin paying back their student loans on September 30 of next year, but interest will still accrue, so if possible, Landman said it’s best to start paying them off as soon as possible.
“We talk about compound interest and usually in the investment we talk about it working for you compounding, making interest off your dividends, interest off your interest if you have a loan that will work against you,” Landman said.
Another option for borrowers is applying for the new income-driven repayment plan (IDR) called the SAVE Plan which will provide the lowest monthly payment compared to any other IDR.
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