Student loans: Here’s what borrowers will cut from their budgets when payments resume
On September 1, the federal student loan pause is set to end, and 43 million Americans who have been affected by the pause will begin repaying. While several payment schedule extensions have given borrowers breathing space during the pandemic, they are feeling the pressure of having gone 18 months without a payment and then facing rising inflation and interest rates.
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GOBankingRates surveyed more than 1,000 Americans across the country and spoke with a range of financial experts to find out how borrowers will handle repayments – and offer ways to fight expenses and stay financially healthy.
33% of student loan borrowers say they’ll need a side gig for extra income
It’s hard to imagine student borrowers, probably out of college and working full-time, having to take on a new side job to account for monthly repayments – but that’s the reality. According to According to survey respondents, 33% of Americans with student loans say they will have to take a side gig when repayments resume.
Taking on a side hustle comes with an added responsibility, which borrowers may want to consider when deciding which type of side hustle is right for them.
“If you’re taking a side gig, make sure you’re making estimated tax payments throughout the year,” said Jay Zigmont, financial planner and founder of childless wealth. “It may seem simple and efficient to take a side gig, but you are effectively running your own business and are responsible for taxes, proper insurance and financial management.”
Side gigs to consider
When it comes to paying off student loans, a side gig can help ease financial stress and generate income.
“Some of the side gigs that can help are freelancing, night jobs, and working overtime for extra pay, if any,” said Tracy Ackler, CEO and Recruiter at Get a payday loan. Part-time jobs that may fall into these categories include yard maintenance, bookkeeping, remote writing, consulting, and website design.
It is important for borrowers to find a side job that works with their schedule and skills in order to maintain loan repayments and avoid burnout.
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41% of student borrowers say they will save less
As loan repayments resume, many borrowers will need to reassess their finances to accommodate the monthly payment schedule. This may involve taking money out of savings and retirement funds to help with monthly loan repayments. According to the GOBankingRates survey, 41% of Americans with student loans will put less money into savings when repayments resume.
These savings that borrowers draw on may also have been hit due to high unemployment rates and the financial burdens of the pandemic, leaving borrowers with heightened anxiety about repayment.
How to Save Money While Paying Student Loans
In order to repay student loans, it is important to create a financial plan and continue to accumulate wealth to offset the costs of the loan. Borrowers can also start saving and preparing payments in advance.
“Start acclimating to the payment schedule now,” said Peter Dunn, CEO of your money line. “For example, you can start making ‘payments’ to yourself each month and gradually increase the amount until you make full payment in September. Not only will you have the full amount of the payment already listed in your monthly expenses, but you’ll also have a nice amount of money set aside from the payments you’ve made to yourself.
27% of student borrowers say they will defer paying other debts
More than one in four borrowers, 27%, said that because of monthly repayment costs, they would put off paying other debts, such as credit cards and mortgage payments, but Acker said that’s not the case. wasn’t a good idea.
“I wouldn’t advise borrowers to defer any other repayments they need to make in order to focus on student loans,” Acker said. “During the deferment period, other loans will accrue interest. My advice is that people find a way to pay off all loans simultaneously to avoid further interest increases.
39% of student borrowers say they will eat less at restaurants
More than 39% of student borrowers said they would eat out less when repayments resume due to lack of room in their budget for dining out. Experts say eating out is always possible on a tight budget, but it’s important to plan ahead and save money for those evenings.
Tips for Dining Out and Grocery Shopping on a Budget
The costs of student loan repayments can make paying for necessary daily expenses, such as food, daunting. However, with careful budgeting, it is possible to eat out and reduce food and grocery costs while the loan is being paid off.
“While it’s tempting to dine at a favorite neighborhood steakhouse, it can quickly eat up your budget,” said Kevin Steward, co-founder of USBadCredit loans. “These luxuries should be reserved for special occasions. Eat out, take out and order food delivery once a month. Buy your groceries in bulk.
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