Millions of Americans must start repaying their federal student loans again in October, with monthly payments averaging hundreds of dollars a month. Borrowers are reducing expenses, taking on more work, and looking for alternatives to lower their monthly payments.
She has also started asking for October shifts with a catering company and a winery to supplement her income.
McClelland's main job is as a counselor at Petaluma High School in California. She paid off her car loan and saved for the first time because of the pandemic. She will put the $235 she was spending on her car payment toward her student loan, but that leaves another $270 or so she'll have to reallocate or earn.
Justin Cole, 35, of Arkansas, said he doesn't know how he's going to come up with the $166 a month he'll owe starting in October. This is the average payment on his roughly $19,000 loan from paying for college more than 10 years ago.
He said he's already in a mountain of debt and that if I just got a raise at work, it doesn't go into effect until we're full staffed at my family practice clinic.
Cole works in the front office of a medical practice, checking in patients, handling records and managing payment collection. Some of his other debt stems from medical expenses after a car accident early in the pandemic.
The Supreme Court in July ruled that President Joe Biden's administration would not pursue a plan to wipe out $400 billion in student loan debt.
For now, Cole has applied for adjustments to his payments, based on the new SAVE plan and prior income-driven repayment options, which are listed as processing and 'in review' on his account. His main household expenses are'rent, car payments, groceries, and utilities - the same as everybody else, he said.
Unknown is how millions of people suddenly having less discretionary income might affect the economy.
On an earnings call last month, the chief financial officer of Target said that student loan payments reseting will 'put additional pressure on the already-strained budgets of tens of millions of households, a sentiment echoed by the financial chiefs of Best Buy and other retailers.
In the latest Federal Reserve survey of economic conditions, a restaurant-industry observer in Boston said workers are taking more hours and, for the first time, credit card debt has topped $1 trillion. More than half of student loan holders increased their credit card debt during the pandemic, TransUnion said. Consumer savings, which reached $1 trillion in 2021, are falling.
McClelland qualifies for the Public Service Loan Forgiveness as a public school teacher who will have worked in the field for 10 years next March. She's putting her loans in order to hopefully receive that cancellation next year. The program eradicates remaining debts for federal student loan holders who work in public service while making 10 years of payments.
Many with student debt have access to the Public Service Loan Forgiving Program, which is one of several options available for relief. After Biden's original plan for forgiveness was struck down by the Supreme Court in July, the White House has said it will use the Higher Education Act to bring cancellation to more borrowers. The process of negotiating rule-making is ongoing, and it is currently undergoing a process known as negotiated rule-making.
Other sources of relief for borrowers include false certification, borrower defense, closed school, total/permanent disability discharges, and alternate repayment programs like income-driven repayment.
McClelland, for her part, said she spends a lot of time coaching high school students on how to avoid burdensome loans.
Despite working while in school and since - Moonlighting at Starbucks, wineries and restaurants as well as Counseling - McClelland still has a balance of about $38,000 in debt, from initial loans of $10,000 towards her undergraduate studies and $40,000 for her masters in counseling at Sonoma State.
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