Hello out there!
Happy post -Thanksgiving!
It’s been a while, but I’m back.
I have been a little busy. However, never fear your advisor to the financial underdog is here! Ha ha.
Let’s get to it.
The student loan pause has been extended. The Biden Administration has announced that the payment pause on federal student loans for 43 million students will extend through June 30, 2023. Payments will also not start until 60 days after, August 30, 2023.
This means the loan forgiveness first announced in August 2022 will have time to work its way through the Supreme Court (SCOTUS).
If you are a Pell grant recipient, that means $20,000 in loan forgiveness for you, if approved, and for all others $10,000, if you meet the eligibility criteria for forgiveness.
This is good news indeed, as it will give many Americans time to squirrel away funds for saving, beef up investments or additional savings accounts, and pay off debt.
My advice is always to start with an emergency fund of $2,500. Then work your way to three to six months of expenses. As debt is paid off, you can increase your savings and investments.
The 0% interest rate while loan payments are suspended is also an added bonus. That means if you owe an average of 6% on the median $38,000 of student loans, then you are saving $2,280 a year on interest. Even higher for those that owe more.
The three-year repayment pause has allowed Americans to save a collective of millions of dollars in unaccrued interest. Basically, the saving on interest has turned this into a form of loan forgiveness.
In addition, to the $10,000 or $20,000 loan forgiveness, if approved, would effectively turn those amounts into grants.
So keep your figures crossed and make this a wish on every star and birthday candle, if you are one of the ones that will get forgiveness as this will allow you to receive 100% loan forgiveness.
Without these estimated $300-$500 loans payments hanging over your head, you are now able to start saving for your future in the form a home down payment and socking money away in your 401(k).
And by the way, the IRS has now raised the 401(k) limit to $22,500 per year. If you were to max out your retirements account with this amount of money, with a historical stock market return since 1980 of 11.34%, you would basically be a millionaire in 16 years with a balance of $978,768.96.
Put every dollar to work that you possibly can.
The math tells you that being a millionaire is within your grasp.
You just have to keep reaching for it.