Don’t forget your student loan payments during the holidays. Do this instead
Currently, 8 million borrowers have suspended their student loan payments due to legal challenges to the Biden administration’s Saving on a Valuable Education relief plan. But that’s not the case for millions of additional borrowers who squeeze their monthly student loan payments into their budgets during the holidays.
This time of year can add up quickly, especially if family members are expecting you to give everyone memorable gifts. The pressure can cause you to overspend and delay paying certain bills that you know will be due after the holidays and beyond.
As a student loan expert, I never recommend letting non-essential expenses leave you in a bad financial situation for months or years. But I also know that accidents happen. If you’re worried about paying for vacation time and student loan payments, here are some tips for prioritizing both and what to do if your payments fall behind.
Don’t skip paying a student loan for extra shopping
Missing student loan payments can have serious consequences, such as negative reporting to the credit bureaus. That can hurt your credit score and history. And you’ll still have to catch up on missed payments, which can lead to late payments and accrued interest.
If you’re concerned that your monthly student loan payment is too high, look into federal student loan income-driven repayment plans. With these plans, your monthly payments are based on your income instead of your outstanding balance, which can lower your monthly payments.
Enrolling in autopay can help you prioritize your student loan payments and potentially secure a small interest rate reduction. However, it is crucial to manage your bank account balance to avoid redness. This can lead to fees and other complications if you don’t have sufficient funds to cover your scheduled payments.
Read more: How the Fed’s interest rate decisions affect student loan borrowers
Be honest about your budget
The holiday season can be a busy and expensive one. Once you fall behind, you can spiral into taking on more debt to make ends meet, such as buy now, pay later plans and credit cards. One of the largest”wealth killersAccording to Edvisors, debt, especially credit card debt, has high interest rates. Not just during the holidays, but with all expenses, the goal is to avoid overspending to help maintain your financial stability.
It may sound obvious, but reviewing your budget before holiday shopping is crucial to staying on track. Be aware of any restrictions, such as monthly bills and supplies. Find out what’s left to determine a workable budget for your Christmas shopping.
Set giving expectations with your friends and family
Practicing noisy budgeting can come in handy when your budget is tight. This social media trend encourages you to let your friends and family know that you’re prioritizing certain financial goals, like paying off your student loans, and letting them know that you may need to opt out of expensive events or look for move towards affordable alternatives.
What does that look like? Here are a few suggestions:
Gift exchanges
Instead of buying a gift for everyone on your list, encourage your friends or family to participate in a Secret Santa or White Elephant. This means you have to buy fewer gifts and still celebrate with your loved ones.
One of my favorite family traditions is the white elephant exchange with my cousins. We’ve set a gift limit of $10 to $25 to reduce the pressure on gift buying. It’s a fun time for everyone and it allows us to save some money.
Find deals that fit your budget
As you narrow down your gift list, make sure you keep an eye out for deals to save even more. I always have good luck shopping at my local wholesale club. I can get deals on gift cards, like two $50 gift cards for $80, an automatic 20% savings. Keep in mind that these signature deals may sell out as the holidays approach, so plan ahead and remember to stick to your budget.
Give gifts that are memorable but less expensive
You don’t even have to give gifts to enjoy the season. Instead, you can send cards with personalized, heartfelt messages or make gifts with materials you already have. If you haven’t been in touch with your loved ones in a while, prioritize inviting them over for coffee or dinner after the holidays to put less strain on your budget in the coming weeks.
Read more: Don’t give in to gift debt this holiday season. Expert tips to curb debt and overspending
What to do if you fall behind in your studies
If you accidentally overspend and can’t keep up with your loan payments, it’s time to call your loan servicer or lender. Federal student loan programs may have options to change your repayment plan or defer payments.
On the other hand, private student loan lenders may be able to place your loan in forbearance status to give you some breathing room. Make sure you understand how this will affect your loan and its future benefits. For example, interest may continue to rise. But it’s best to call before you fall behind because the longer you wait, the fewer options you have.
