With some peopleworking less, or out of work altogether due to the COVID-19 pandemic, student loan debt is a significant issue in some households.
There are a few things to consider when making payments.
“First, what’s your overall financial situation,” said Richard Saleman, president of Family Investment Center in St. Joseph. “Now if you’re in a position where you don’t have any other debts and can afford those payments, go ahead and pay those.”
Each situation is going to be different, especially if job employment is intermittent or there is current unemployment.
“If you have the opportunity to defer those low-interest payments and maybe pay the money on a higher interest rate, credit cards, that makes more short-term sense,” Saleman said. “I would recommend paying off your highest interest rate first.”
Borrowers can choose to have federal direct student loan payments and interest suspended until October 2021.
“For somebody that’s carrying student loan debt, the key is you can’t continue to spend while deferring those loans,” he said.
Last week, President Joe Biden stated in a town hall meeting that he does not support a proposal to cancel up to $50,000 of a person’s student loan debt but would consider possible forgiveness of $10,000. Biden said he does want to make the cost of community college free.
“If you’re gonna forgive the student loans for the people that didn’t pay them, does that mean you’re going to refund the money to the people that did pay them off?” Saleman said. “I think there’s a real perceived fairness issue there that would have to be addressed in whatever legislation or executive action is taken to resolve that.”
Loan consolidation may be the best option for many to find lower monthly payments and interest rates.
“You’re at least guaranteeing a lower interest rate when you get it into a fixed-rate loan right now versus an environment in the future where interest rates could go back up,” Saleman said.