Buffalo, N.Y. (WBEN) - October brings a new reality for student loan borrowers. For the first time since the pandemic, 28 million Americans are on the hook for federal student loan payments.
It represents a big change for many and could put a significant strain on their budget.
"The population that has significant student loan debt also likes to spend," said Jeff Boron of SendYourKidstoCollege.org. "They like to have fun doing things. Obviously they have necessities, but they're spenders. It's a spending generation and it's going to be a big adjustment for some because the average payment for many is going to be around $400 a month.
Boron encourages everyone to take a look at the SAVE program, an income based repayment plan.
There is a calculator right on the student loan website, StudentAid.Gov.
You can plug your numbers in. It's income-based.
"It will be a lifesaver for many. It will bring down the monthly payment. And more importantly, if the monthly payment does not cover the interest, the interest will not keep rolling and accruing," said Boron.
Borrowers should look at that first. The last thing they should do, Boron added, is to forget about paying and think it's going to go away. "That dream is gone."
The notion of wiping away debt became very controversial and Boron does not expect to see it again.
If you have been saving during the pandemic and want to pay off the loan and at least pay down a large chunk of it, Boron said it would be a good financial move for many to do that.
"Look at your current interest rate," he said. "Many of these loans were taken out when interest rates were low. They were 3% or 3 .5%. That's low compared to what's out there today. If you've been saving money in an account that earns more than that, do the calculation. How much am I paying in interest versus how much am I gaining in interest by having the money sit in a financial institution. Then you can decide whether to pay it off, or make payments and collect interest on the account."