In order to help students and their families that may be facing financial troubles due to the COVID-19 pandemic, the Biden administration has announced that they will extend the federal student loans pause on payments until the end of August. This is great news because it allows borrowers a chance to save up more money for when it comes time to pay again.
We always like to help our young people with their financial health, so we have some tips for how to prepare for when student loan payments restart later this year.
1. Make A Budget and Make Cuts
The first step that you need to take is to create a budget where you account for any money that you have coming in and then make a long list of every expense that you pay monthly. Next, you need to decide what you can cut. For instance, do you need to have every streaming service, or can you bring it down to one or two? Also, is it necessary to go out for coffee every day or can you save money by brewing it at home?
You need to take all that money that you saved and put it aside so you can make your payments once student loan payments resume. Consider putting it into a high-interest savings account so you can gain interest in the meantime.
2. Pay Off Other Debts During the Student Loan Payment Pause
Another idea is to use the money that you save from unnecessary expenses and instead pay off your other debts, so you can put most of the focus on paying your student loans when that time comes.
There are multiple strategies that you can try when it comes to paying down your debt. One option is to start paying off all of your smaller bills so you can have them out of the way and instead focus on the larger items. The other option is that you start chipping away at the largest debt so you can get that mountain out of your way. Either way, it is a good idea to lower your credit card balance and other debts, so you are more prepared for your student loans.
3. Consider Your Hobbies
Not only will your existing debts make it harder for you to pay your student loans, but being behind on your financial responsibilities could take a psychological toll on your mental health. When we have money problems, we start to feel overwhelmed and burned out, and that can lead to physical ailments like lack of sleep, headaches, and irritability. These side effects can impact your financial situation even more and make it hard to focus on your studies.
One way to fight this stress is to take time away to engage in hobbies that you enjoy. Hobbies like reading, podcasting, photography, and painting are great ways to be alone with your thoughts and give your mind a chance to refresh.
The best part about hobbies like writing and jewelry making is that you can actually turn these activities into a side hustle. You can use the money that you earn from selling your work to clients to help with your student loans.
4. Decrease Utility Bills
Finally, you need to think about all of the places where you can save around your house and lower your utility bills, so you are paying out less every month. By turning off the lights when you leave a room and keeping the television off when not in use, you can cut down on your electricity bill.
You can also consider other spaces around your home where you may be wasting resources, like the kitchen. For instance, many people have a refrigerator that runs longer than necessary and contributes to a higher-than-necessary utility bill. Hire a professional to fix these issues so you can save as much money as possible before September.
As you can see, there are many ways that you can take advantage of the money you save during the federal student loans pause on payments. Consider these tips, and you’ll feel better about your financial future. If you need help creating a budget and managing how to add your student loan payment back in, a credit counselor can help.