With the COVID student loan payment pause about to end on October 1, 2023, many households are wondering how they are going to fit this into their budget. And for recent college graduates, this will be the first time they pay their loan, even if graduation was three years ago.
In the past three and a half years, many people bought cars, houses, furniture, and other big items that they may be making payments on and may feel financially squeezed as it is. It can seem overwhelming at the thought of another bill being due every month.
You may be familiar with Income-Driven Repayment (IDR) plans for federal student loans. There are a few that have been around for a while that you probably have heard of but the Biden administration just announced in June 2023 a new IDR plan to replace REPAYE (Revised Pay As You Earn). This new plan is SAVE: Saving on a Valuable Education.
With SAVE, your monthly payment is still based on your income and family size just like the REPAYE plan. Here’s what qualifications have changed:
- Income exemption increased from 150% to 225% of the poverty line.
- As long as you make monthly payments, you won’t be charged interest each month.
- Your spouse’s income does not need to be factored in if you file taxes separately.
Applications for the SAVE plan are open, with additional changes rolling out next year, too. You can learn more here: StudentAid.gov/SAVE
For those who know they will have to pay again starting in October, your best tool to manage your finances is a household budget. This will let you see if you’re running a monthly surplus or deficit. The budget will give you a snapshot of where your money is going so you can catch any spending leaks (those unhelpful expenses that make it hard to save due to impulsive or habitual spending on unnecessary items) or find out what you can cut out altogether.
Not sure how to put together a budget? Family and Consumer Sciences Agents around Florida can help! Learn more and sign up for a free private virtual session here: https://sfyl.ifas.ufl.edu/family-resources/money-matters/financial-counseling/