Student Loans on Steroids!
President Biden made a significant announcement last week. Considering 43 million American’s have student loans, I’m guessing you either have a loan or know somebody who does. Feel free to pass this information along to them as well.
3 Highlights of President Biden’s Announcement
1) Federal student loans will continue to accrue no interest and will not require repayment until December 31, 2022.
2) There is $10,000 cancellation limit towards federal student loans - $20,000 if you were a Pell Grant recipient.
A) Income Limits:
a) $125,000 for individuals
b) $250,000 for married couples.
B) Applications
a) This will not be automatic. You must apply. The applications should be available early in October.
C) The cancellation will only apply to FEDERAL student loans.
3) The income driven repayment plans will be adjusted by cutting the monthly payments in half.
How can I prepare?
Your Loans By the Numbers. Who holds the loans? What are the balances and minimum payments of your loans? What will your minimum payment be? Knowing answers to these questions give you all the information you need to find freedom.
Make and stick to your budget. Just as knowing your loan numbers is not enough, having a budget is what makes dreams turn into reality. Your budget is a tool that you use to tell your money where to go. Robert Kiyosaki once said that it is not what you make but what you keep that makes you rich. Keep a budget to keep your resources doing what you want them to do.
Get off the minimum payment malaise. Don’t feel like you must be resolved to make minimum payments forever. Assemble your debt snowball and start maximizing your payback. With the current interest rate of 0% disappearing soon, get a side hustle and HUSTLE!!! Target a payoff between 2-4 years and no more.
Does the tax man commeth?!?!. Although the American Rescue Plan Act should shelter the student loan debt cancellation from being considered taxable income, there are several states who are not fully conformed to the provisions of the act. These states include Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia, and Wisconsin. Speak with your trusted CPA for more guidance.
Questions to Ponder
Although we can debate the merits and impact of the government infusing even more cash into the economy in a time when inflation is already making us feel the squeeze on our wallets, the reality is that this is still an individual gift. If you have squandered the past year and half by not paying off your interest free loans, don’t feel discouraged or anxious. Now is the time to act.
· Do you have a budget? Is it up to date?
· Do you have a plan to pay off ALL of your debt (debt snowball)?
· Do you need a guide – a lifeline so to speak – to help you navigate your finances?
To being more educated than our former selves who took out the student loans!
P.S. I know it has been a while since I have spoken to many of you in a one-on-one setting. If the feelings of being overwhelmed and unorganized by money are still nagging at you, lets talk again. Clients that I work with are finding real hope and peace by learning how to win in their relationships and with their money. Don’t wait, that can be you too!
P.P.S. As exciting as this news sounds, please don’t start jumping for joy yet. This decision was created via administrative action. Please expect lawsuits to follow in the coming months. Giving the Supreme Court’s rulings related to administrative actions over the past two years impacting the CDC, OSHA, and EPA, I heavily question if they would rule any differently towards limiting executive actions through the DOE (Department of Education).