In October, millions of Americans must begin repaying their federal student loans, with monthly payments averaging hundreds of dollars. Borrowers are cutting spending, taking on extra work, and seeking for ways to reduce their monthly payments to prepare.

Megan McClelland, 38, said she has begun requesting October shifts at a catering firm and a winery to augment her income.

McClelland’s primary occupation is that of a counselor at Petaluma High School in California. She paid off her auto loan and was able to save for the first time during the more than three years when payments were suspended due to the pandemic. She’ll put the $235 she was spending on her car payment toward her student debt, but she’ll still need to find another $270 or so.

“It had been a huge relief the past few years to not have that financial burden,” she stated. “In the coming months, I’ll be looking to see where I can cut back on my budget.” Probably less eating out and more picking up side jobs.”

Justin Cole, 35, of Little Rock, Arkansas, said he had no idea how he can pay the $166 a month he will owe beginning in October. That is the expected payment on his about $19,000 in student loans from more than ten years ago.

“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 stated.

Cole works at the front office of a medical clinic, checking in patients, organizing records, and collecting payments. Some of his other debt stems from medical bills incurred as a result of an automobile accident early in the pandemic.

“If those loans were forgiven, I could finally work on getting my credit up and actually saving money for once,” he stated. “If they were forgiven out of the blue, I’d be ecstatic.”

In July, the Supreme Court rejected President Joe Biden’s administration’s effort to wipe off $400 billion in student loan debt.

For the time being, Cole has requested payment modifications based on both the new SAVE plan and earlier income-driven repayment alternatives, which are displayed as processing and “in review” on his account. Borrowers can use the SAVE, or “Saving on a Valuable Education,” plan to make smaller payments depending on a proportion of their discretionary income.

“Rent, car payments, groceries, and utilities — the same as everybody else,” he remarked of his key household expenses.

It is unclear how millions of people with less discretionary spending will effect the economy.

Target’s chief financial officer stated on an earnings call last month that beginning student loan payments will “put additional pressure on the already-strained budgets of tens of millions of households,” a feeling shared by Best Buy and other retailers.

According to the Federal Reserve’s most recent study of economic conditions, one restaurant-industry observer in Boston, workers are working longer hours, and credit card debt has surpassed $1 trillion for the first time. According to TransUnion, more than half of student loan recipients increased their credit card debt during the pandemic. Meanwhile, household savings are declining after peaking in 2021.

McClelland is eligible for Public Service Loan Forgiveness because she is a public school teacher who will have worked in the field for ten years in March of next year. She is consolidating her debts in the hopes of receiving a loan discharge next year. The program forgives remaining federal student loan obligations for those who engage in public service and make 10 years of payments.

“I only have six payments to go, but it’s still stressful,” she stated. “I have to find about $500 a month starting next month towards this payment that I haven’t had in so long.”

The Public Service Loan Forgiveness program is one of several options for debt relief that are still available to many students. Following the Supreme Court’s rejection of Biden’s original plan for forgiveness in July, the White House has stated that it will use the Higher Education Act to cancel more loans. It is currently going through a process known as “negotiated rule-making” to define the specifics of that strategy.

Borrowers can also seek relief through false certification, borrower defense, closed schools, total/permanent disability discharges, and alternative repayment methods such as income-driven repayment.

McClelland, for one, says she now spends a lot of time advising high school students on how to avoid taking on debt.

“I had no financial guidance when I was younger, from my own parents or from school,” she stated. “I didn’t ever understand the long term impact.”

Despite working while in school and since — moonlighting at Starbucks, wineries, and restaurants, as well as counseling — McClelland still owes around $38,000 on loans totaling $10,000 for her undergraduate studies and $40,000 for her master’s degree in counseling at Sonoma State.

“I knew I wanted to go to college, and my parents didn’t have any money,” said McClelland. “I openly tell kids all the time, ‘As someone who was once in your shoes, I highly recommend finding a way to avoid taking out loans.'” When you’re 17 or 18, you think to yourself, ‘Oh, fine, I’ll figure this out.’ Then it’s discouraging to be in this financial condition.”


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