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It’s official: US President Joe Biden has refused to forgive student loans. $ 6 Trillion Budget Proposal it unveiled last week.
Meanwhile, payments on all federal student loans are due again at the end of September. Experts say now is the time to stop holding your breath over student loan payments and instead focus on getting your finances in order.
“I have not seen the student loan forgiveness on the American cards, and I do not see the abstinence period being extended. The economy is recovering, everything is back to normal, and everything is reopening, ”says Robert Farrington, founder and CEO of College Investor, a website offering advice on student loan debt.
If you have federal student loans, you have a few more months to decide what to do with the excess cash left over from non-payment. “You shouldn’t give the government any extra money that isn’t required of you, especially right now, instead of talking about potential loan forgiveness,” says Farrington.
It’s an opportunity to tidy up other priorities, ”says Farnush Torabi, financial journalist and editor at NextAdvisor. “If you have tens of thousands or more of federal student loan debt and have to fill other financial holes – like paying off a higher interest credit card debt, increasing your savings, or contributing to your retirement plan – I think smart money is it is to focus on these areas first, ”Torabi wrote in recent NextAdvisor column…
While student loan payments are still on hold, here are a few things you can do to improve your financial situation.
Make a budget
Above all, get organized and put all your finances on the table. The tax season is over; summer is usually a great time to take a few minutes to collect your finances. Determine what you owe and own and start budgeting. If you don’t know how to proceed, we have tips on how to budget…
“Then you can start making some decisions about where to prioritize any additional funds you might have,” says Farrington.
Pay off high interest rate debt
Now is a great time to prioritize repayment of other types of debts you may have, especially high-interest debt.
“I would start at the top of the list with private student loans that are not suspended, and then I would probably move on to credit cards and personal loans, any kind of unsecured debt like this, and start trying to fix it,” he says. “Then look where else you can start to influence, maybe a car loan or an emergency fund.”
You will want to create a payment plan to pay off your debt as quickly and efficiently as possible. After you’ve used up your budget, consider two of the most popular repayment strategies: snowball or avalanche of debt.
The debt snowball method involves making the minimum payments on all debts, except for the account with the lowest balance. If you are using the debt avalanche method, you will first focus on the account with the highest annual interest rate or annual interest rate. The Debt Avalanche method will save you the most money because it gets rid of debt with higher interest rates first.
Build your emergency fund
The COVID-19 pandemic has shown us that the presence emergency fund is always important, so you should start building it ASAP if you haven’t already.
“What I recommend now for people who can save money is to start with an emergency savings fund if they don’t already have one, given the unpredictability of the past year or so,” says Jessica Ferastoaru, student loan consultant with Take Charge America, the national non-profit credit and student loan counseling agency. “I think it is a smart move to create an emergency fund or keep increasing it to prepare for potential job loss or income cuts.”
From point of view how much should you have in your emergency fund, the standard recommendation is three to six months of spending. But Farrington says the amount you put aside for your emergency fund is ultimately a personal choice. “My philosophy is that everything is better than nothing,” says Farrington. “I think $ 1,000 is a great starting point.”
Ferastoaru recommends right now to give preference to savings over debt repayment. “Paying off debt is always a smart financial decision, but it’s so unusual to have student loans at 0% for such a long period of time,” she says.
Save for retirement
If you have a reserve fund, your debt is stabilized, and you are following a budget plan, consider turning your attention to savings for retirement.
Financial experts agree on the best way accumulate wealth and retire through investment. You will need to find a way to regularly deposit a portion of your salary each month, and the easiest way to start is with a retirement account such as a 401 (k) through an employer or individual retirement account (IRA)…
Assuming you can meet your basic needs, use whatever extra cash you have to support – or perhaps increase – your contributions.
Start procrastinating for major life events
See what your goals are for the next few years. maybe savings on the down payment on the house, savings for your child’s college, or investing for retirement. Be that as it may, you can start saving money right now at high yield savings account or CD while student loan payments are suspended.