Student Loan Forgiveness
This week, President Joe Biden announced his long-awaited student debt forgiveness plan. TLDR: It cancels up to $10,000 of federal loan debt for individuals who make less than $125,000 per year (or households making less than $250,000) and up to $20,000 for Pell Grant recipients. Plus, it extends the pause on federal loan payments through Dec 31, 2022. The move could eliminate student debt for about 20 million federal borrowers. But it won’t go nearly as far for those with higher balances who (spoiler) are often women.
Check your eligibility. You could be granted forgiveness automatically if the Dept. of Education already has your income info. If not, applications will be available by the end of December. Sign up here to get notified when applications go live.
Prep for repayment. $10,000 in forgiveness will clear the balances for about a third of federal borrowers, but the average balance is over $37,000. Read: A lot of people will need to choose a debt payoff strategy when payments resume in January 2023. Note: Biden’s plan allows borrowers on income-based repayment plans to cap their monthly payments to 5% of their monthly income, down from the previous 10% limit. Update accordingly.
Adjust your budget. And we don’t mean go on a spending spree because you’re “saving” $10,000 in loan payments. If forgiveness frees up some extra money in your monthly budget, make a plan for it. Maybe there’s another debt you need to address (think: your mortgage). Or you can start investing more $$$ to hit your long-term goals (think: retirement). PS: Keep an eye on your credit score. Reducing your student loan debt could cause it to decrease temporarily. Here’s how to get it back up.
Take advantage of time. Thanks to the extended payment pause, interest isn’t accruing on your debt. So now is a great time to work on shrinking the principal balance (translation: lowering future interest fees). Making extra payments is the simplest way to do that.
Financial Goal Unlocked
The Goal: Starting a family or growing the one you have.
A Winning Mindset: Think about your family’s financial future ASAP.Like everything else, having a kid has gotten more expensive (thanks, inflation). New data from the Brookings Institution estimates that it costs about $18,000 per year, or over $300,000, to raise a child born in 2015 to age 17. That’s up 9% from the institution’s last estimate two years ago.
A Winning Strategy: It’s never too early to start saving for a family. There are a few simple ways you can invest in your family’s future if you have babies on the brain. Here are a few ways to start:
Enroll in a health savings account. Aka an HSA. Because having a baby isn’t cheap. This tax-advantaged investment account can help you save on all kinds of medical expenses. Think: Fertility treatments, birthing costs, baby supplies, and more. Plus, an HSA can be used for retirement if your plans change. So it can’t hurt to start one.
Open a 529 plan. Because that $300,000 estimate doesn’t include the costs of private education or college. This investment account can be used to pay for everything from private kindergarten and elementary school to a college education. You can start one in your own name now and transfer it to your child later.
Invest in life insurance. The younger (and presumably, healthier) you are when you get life insurance, the cheaper it is. Psst…even if you have life insurance through your employer, it generally isn’t enough to cover a whole family.
theSkimm: If you know a family budget is in your future, it’s a good idea to make it a part of your financial plan ASAP. Opening an HSA, a 529, or getting life insurance now could help you get a head start.
PS: If having kids isn’t for you, check out these books about being child-free.
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And Also This…
Who’s telling new moms and dads to get back to work?
A growing percentage of employers that are cutting maternity and paternity leave. Data from the Society for Human Resource Management shows the number of employers offering more leave than required by law fell to 35% this year, down from 53% in 2020. Reminder: The US doesn’t have a federal paid family leave policy. And only 11 states require employers to offer some paid leave.
What’s on the rise?
The average reservation wage. Aka the minimum salary people say they’d be willing to accept for a new job. It’s now $72,873, up 5.7% from last year, according to the latest survey by the Federal Reserve Bank of New York. But men are asking for more (hi, gender pay gap). Women are asking for an average of $59,500 while men are looking for more than $86,000. So go ahead, negotiate for that higher salary.
If you’re excited to see “Don’t Worry Darling,” “Wakanda Forever,” and “Avatar 2” this fall…
While some workers are “quiet quitting”…
Others are quitting loud and proud, even if it means making less money.
Tell Us How You Really Feel
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