It’s official. The $6 trillion budget proposal that President Joe Biden unveiled last week included student loan forgiveness.
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All federal student loans will be due for payment at the end September. Experts advise that now is not the time to wait for student loan relief. Instead, focus on your financial goals.
“I didn’t see student loan forgiveness in American cards, and I don’t see the forbearance period being extended.” Robert Farrington, founder of The College Investor and CEO, says that the economy is recovering, things are returning to normal, and that everything is opening up again.”
Federal student loans have the option to make additional payments for a few months. Farrington states, “You shouldn’t give the government any additional money that you don’t need, especially in light of possible loan forgiveness talk.”
Farnoosh Turabi, a contributing editor at NextAdvisor and financial journalist, said that this is an opportunity to order other priorities. Torabi recently wrote that if you have federal student loan debt in excess of tens or thousands and other financial gaps to fill, such as paying off higher-interest credit cards debt, saving more, or contributing to your retirement plans, the smart money is to concentrate on these areas first.
Here are some things you can do for your financial future, even though student loan payments remain on hold.
Budget
Get organized. The tax season is over. Summer is a great time for you to get organized with your finances. Start constructing a budget by getting clear about what you owe. We have some tips to help you make a budget if you aren’t sure where to start.
Farrington says, “Then you can make some decisions about where to place any additional priorities you might have.”
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Reduce high-interest debt
This is a great moment to pay off any other debts, particularly high-interest. Farrington states, “I would start at top with private student loans that haven’t been paused. Then I would likely go to credit cards, personal loans, or any other type of unsecured debt, and try to eliminate that.” Then, look for other avenues that you could use to make an impact. Maybe a car loan or emergency fund.
Build Your Emergency Fund
“What I recommend to people who can save money is to create an emergency savings account if they don’t have one,” Jessica Ferastoaru (a student loan counselor at Take Charge America), a national non-profit credit and student loan counseling agency. It’s smart to create an emergency fund, or to continue growing it to prepare for possible job loss or income reduction.
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The standard recommendation for how much money you should keep in your emergency fund is to have three to six months of expenses. Farrington states that the amount you put in your emergency fund will be a decision for you. Farrington states, “My philosophy is that any amount is better than none.” “I believe $1,000 is a great start point.”
For retirement, save
If your emergency fund is stable and your debt is managed, you might consider saving for retirement. Experts agree that investing is the best way to build wealth, and plan for retirement. It’s important to have a regular way to contribute a portion each month to your retirement account. This could be a 401k through your employer or an individual retirement account (IRA).
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Save for major life Events
Consider what your future goals will be in the next few years. You could save for a downpayment on a house or for college savings, or invest for retirement. You can save money now for whatever reason, even if student loans payments are halted.