As of Friday 6/30/2023, the Supreme Court shot down the proposal to relieve $10-20k of student loan debt for borrowers. I know, what a way to start a holiday weekend. Whether you supported the bill or not, Americans are now scrambling to figure out how they're going to add this bill back into their budget. If this applies to you, three steps to follow:
Research who your loan servicer(s) is/are and write down how much you'll be expected to pay. It's common to have a lower payment for the first year, with a monthly increase coming in 2024.
Find the due dates when payments are set to resume. Some are kicking in right away in September, others are waiting until later in fall.
Take a hard look at your budget. Write down all of your monthly income, and subtract all of the bills you know of. Then, factor in expenses that are billed at different frequencies (check out this blog post for help, see "Rule Two"). Do you have any money leftover? Can you fit in this expense in the fall?
If this is overwhelming, reach out. I break down your expenses and find the true number you spend each month. You can get a free trial of YNAB and start NOW so that you aren't trying to figure it out a week before the payment is due.
The thought may have crossed your mind to join in a protest by not paying your student loans to "teach the government a lesson". DO NOT DO THAT. AGAIN: DO NOT DO THAT!
Here are 8 consequences when you default on student loans:
You become ineligible for future student loans (this may matter if you were planning to co-sign for a loan for your child).
Defaults stay on your credit score for 7 years like a bankruptcy. Perkins loans stay on your credit report until paid in full, AND then an additional 7 years if you've defaulted.
If your debts are sent collections, they incur anywhere from 25-40% of the total amount in fees. When you pay them back, you'll have to pay much more. If you think your death will discharge your loans, know that only applies to federal loans. Private loans are repaid by whatever estate you leave your family.
Any tax refunds will be applied to defaulted loans without your permission.
Your wages can be garnished, and then your employer knows you aren't paying your loans. This could effect your work evaluations and employability.
Some government benefits can be tapped into, including Social Security. Defaulted loans will get paid before you do!
You can be sued and required to hire a lawyer and take time off of work for court hearings.
State licenses can be revoked (nursing, liquor servers, insurance sales, etc.). You could lose the ability to work in your career, and all of those loans would be wasted.
What do you think? Every time I see an article pushing people to protest, I cringe. It just isn't worth wrecking your financial future to send a message.