This fall, the payment pause on student loans came to an end after three years of pandemic-era freezes. The first repayment bills were due at the start of October, just ahead of the holiday season.
In Massachusetts, more than 870,000 residents owe nearly $36 billion in student loan debt. When we asked our readers if their holiday spending will be impacted by student loan repayments, the majority (51%) of the 29 respondents to our poll said yes, they expect to spend less this holiday season.
Some readers told us their loan repayments have limited or completely eliminated their ability to give gifts this holiday season.
“My holiday budget and my life budget have been destroyed by loan payments resuming,” Christopher from North Attleboro said. “Of course, true family and friends love you without the need or want for gifts and they understand, but it still makes it hard emotionally to not give gifts.”
Similarly, Boston.com reader Tyra said her $350 monthly student loan repayments have made getting gifts for her siblings impossible this year.
“I have 7 siblings and I am the oldest and the only one to have gone to college so far, and I cannot afford to really get my family any gifts. It’s hard,” she said.
Three in four (76%) student loan borrowers said the resumption of loan payments will dip into their holiday spending budget, according to a U.S. News & World Report survey of former college students. More than half (54%) said they are likely to spend less on gifts for loved ones this season.
And for those who are planning on giving gifts, like an anonymous reader from Newton, creativity is a must.
“Between this and daycare costs, we need to be very creative in stretching our budget and using hand-me-downs,” they said.
On top of restricted holiday budgets, many student loan borrowers are facing a chaotic and complicated student loan landscape since repayments began, several experts told Boston.com.
“There’s been a lot of problems with loan servicing, people have had difficulty reaching their servicers on the phone, there’s been a number of mistakes and payment calculation errors as folks have tried to get back into prepayment or access, a lot of people are being placed into administrative forbearance, which is a temporary pause on payments because of processing delays or billing mistakes,” attorney Adam Minsky told Boston.com. “It’s been a little bit of a rough start.”
Minsky established the first law firm in Massachusetts devoted entirely to helping student loan borrowers and their families. He is also a senior contributor at Forbes, where he writes about new developments and policy changes in the student loan space.
Navigating the difficulties of the post-payment freeze has been challenging for many student loan borrowers, but particularly women, who collectively hold two-thirds of student loan debt, according to Danielle Piskadlo, executive director for the nonprofit Women’s Money Matters.
The organization works with women over the age of 14 living on low incomes on financial wellness and literacy. Piskadlo said many of the participants in the program struggle to make time to sort out problems with their loans or repayments.
“What we see for the women in our program who are living within that 300% of the federal poverty guideline is there’s just such time poverty as well,” she said. “If you’re working multiple jobs, it can be really confusing and intimidating to approach [Human Resources] and say, ‘Hey, can you sign off on this form? And so there’s, there’s a lot of layers to it.”
Robert Miller, a long-time financial consultant and Women’s Money Matters Advisory Group member, told Boston.com the biggest barrier to loan forgiveness comes down to borrowers feeling overwhelmed, intimidated and confused by the loan landscape.
“Trying to manage the flow of information about student loan forgiveness is like Whack a Mole,” he said.
We asked these experts for their tips and tricks on how to navigate holiday spending and loan repayments this season. Here’s what they shared:
Understand what your loan payment options are.
There are many plans borrowers can use to lower their loan payments. Minsky recommends the Department of Education’s Federal Student Aid website as a resource borrowers can use to search for plans. Borrowers can log in to their accounts and get key information about their student loans, including who their servicer is, what repayment plan they’re currently on, and other options such as the SAVE program, IDR account adjustments, and more. There are also loan calculators that borrowers can use to determine what their payments would be under different plan options.
Miller suggested Attorney General Andrea Joy Cambell’s student loan assistance page as another resource borrowers can use for information.
And even if you can’t find a plan that works for you, there are mechanisms to postpone repayment through forbearances and deferments, Minsky said. But he warned that these options can have some downsides like interest accrual or loss of credit toward loan forgiveness.
The good news, though, is that borrowers who are facing difficulty repaying loans are in a transitory on-ramp period for the next 12 months. This means those with federal loans who miss payments will not be considered delinquent, be reported as delinquent to credit bureaus, have their loans placed in default, or be referred to debt collection agencies, Minsky said.
Despite the on-ramp period, he still advises borrowers to continue making their loan payments.
“The approach should be figuring out what repayment options are the best fit for you rather than trying to avoid repayment that can have some downstream effects,” he said.
Identify your wants versus your needs.
Having a spending plan specifically for the holidays that sets aside all of your fixed expenses first, such as rent and student loan repayments, is vital for borrowers stretched thin this holiday season, Piskadlo said.
Once you have a spending plan in place, Piskadlo encourages borrowers to have open and honest conversations with their loved ones about their wants versus their needs when it comes to holiday spending and gift-giving.
She acknowledged that having these conversations can be difficult, especially for the women she works with, many of whom have young children and are living in transitional housing.
“A lot of really honest conversations have to happen as a family around what are our bigger savings goals. What would it look like to move out and get a place of our own? How would that feel?” she said.
Instead of spending money on physical gifts, Piskaldo suggested spending time with loved ones on experiential things this holiday season and looking into the many Christmas assistance charities and programs across the city.
Avoid ‘buy now, pay later’ schemes.
Buy now, pay later programs offer cash-strapped spenders a way out of their financial woes by dividing their purchases into multiple equal payments. The remaining payments are billed to a debit, credit card, or bank account until the purchase is paid in full. It seems harmless, right? But there’s a catch.
“It seems like it’s manna from heaven, except when you partake it gives you indigestion,” Miller said. “If you don’t pay the first month’s interest payment, your interest goes up to 30% plus.”
Boston.com occasionally interacts with readers by conducting informal polls and surveys. These results should be read as an unscientific gauge of readers’ opinion.