President Biden's student loan forgiveness plan, which was was shot down by Congress, has constituted a major blow to millions of borrowers. Beginning next month, those on the hook for federal student loans will have to start making payments after a multiyear pause.
That's apt to cause a world of upheaval for lots of people. And it will no doubt force many borrowers to make changes to the way they spend money.
Speaking of spending, recent data from MassMutual shows that a large number of student loan borrowers might struggle to repay their debt come October. And the reason is rather unfortunate.
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When you've banked on relief that isn't happening
Many student loan borrowers were convinced that their debt would be wiped away in some way or another. As such, MassMutual reports that more than one-third of borrowers with student loan debt used money earmarked to pay down their loans to make purchases while their payments were paused. Now, that money is gone -- and many people will be left to scramble come October.
If you had money set aside for student loan payments and you spent it instead, you may be regretting that decision now that your debt is clearly still something you're responsible for. If you're able to return the purchases you made using money that was supposed to go toward student loans, that would be a good idea.
But that may not be an option any longer. Your next best bet may be to change your repayment plan and find ways to generate more income.
Coping with upcoming payments
Falling behind on student loan payments could have serious consequences. That's a scenario you'll really want to try your best to avoid.
If you've already spent the money you had earmarked for student loans on other things, you may need to resign yourself to getting a second job so you can boost your income enough to cover your upcoming loan payments. The good news is that the gig economy makes it possible to pick up side work without having to commit to too rigid a schedule.
Plus, in the coming weeks, businesses are apt to need more hands on deck as the holiday season approaches. If you're willing to work retail, it's a good time to be in the market for a second job.
Another option you can look at if you're worried about making your loan payments is changing your repayment plan. If you're on the standard, 10-year repayment plan, for example, and your earnings aren't particularly high, you can talk to your loan servicer about moving over to an income-driven repayment plan.
Going this route might mean spending more money on interest in the course of paying off your loans. But it might also mean lowering your upcoming monthly payments to a level where they're affordable and you don't risk falling behind.
It's unfortunate that a lot of people spent money that should've been reserved for student loans on other things. But it's also somewhat easy to see why that happened.
Student loan payments were paused for a really long time, and President Biden made it clear that he was committed to wiping out student loan balances. So the fact that you had faith in that isn't such a terrible thing. But at this point, it's time to pivot and cope with the situation at hand so you don't end up failing to make your loan payments once they come due.
