Millions of Americans must start repaying their federal student loans again in October, with monthly payments averaging hundreds of dollars a month. To get ready, borrowers are cutting expenses, doing extra work, and looking for alternatives to lower their monthly payments.
Megan McClelland, 38, said she has started asking for October shifts with a catering company and a winery to supplement her income.
McClelland's primary job is as a counselor at Petaluma High School in California. She paid off her car loans and saved for the first time, even though the pandemic lasted for more than three years. She'll put the $235 she's spent on her car payment toward her student loan, but that still leaves $270, or so she'll have to reallocate or earn.
Justin Cole, 35, of Little Rock, Arkansas, said he doesn't know how he will come up with the $166 a month he'll owe starting in October. He paid about $19,000 of his loans from paying for college more than 10 years ago, according to the bank's financial statement.
I'm already in a mountain of debt, and while I just got a raise at work, it doesn't go into effect until we're full staffed at my family practice clinic, he said.
Cole works in the front office of a medical practice, checking in patients, handling records, and managing payment collection. Some of his other debt comes from medical expenses resulting from a car accident early in the pandemic.
In July, the Supreme Court voted to approve a plan by President Joe Biden to wipe out $400 billion of student loan debt.
For now, Cole has applied for adjustments to his payments based on both the new SAVE plan and previous income-driven repayment options, which are listed as processing and 'in review' on his account. His most substantial household expenses are'rent, car payments, groceries, and utilities - the same as everybody else, he said.
The economy is not yet clear about 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 reintroducing student loan payments 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.
The Fed's latest survey of economic conditions has shown workers are taking more hours, and credit card debt has topped $1 trillion for the first time. According to TransUnion, more than half of student loan holders added credit card debt during the pandemic. Consumer savings, which peaked in 2021, are on the decline.
McClelland qualifies for 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 this cancellation next year. The program eliminates debts from federal student loan holders who work in public service while making 10 years of payments.
Many with student debt are receiving relief through the Public Service Loan Forgiveness program. After Biden's original plan for forgiveness was struck down in July by the Supreme Court, the White House has said it will use the Higher Education Act to bring cancellation to more borrowers. The process of negotiation of rule-making is currently underway in the United States.
Other sources of relief to borrowers include false certification, loaner defense, closed school, total/permanent disability discharges, and alternate repayment programs like income-driven repayment.
For her part, McClelland now spends a lot of time coaching high school students on how to avoid taking on burdensome loans, she said.
Despite working during 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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