Will they continue to be so careful with credit-card debt once student loan payments are turned back on? A recent report by the Federal Reserve Board of Governors cautioned that the end of forbearance could lead to a deterioration in credit risk profiles for borrowers, but it didn’t look at specific income levels.
In the meantime, high earners feeling pinched should start to rework their budgets in anticipation of having to restart student loan payments soon. If they’re overextended because of fixed, essential expenses (such as housing), they should compare their pre-pandemic budgets prior to the student loan pause with their current ones and figure out how their spending has changed and what they can do differently to accommodate for student loan payments, said Kevin Mahoney, a certified financial planner in Washington.
If the financial stress is due to discretionary spending, for things like travel, dining out or social activities, then it’s obvious those things need to be dialed back to be able to make student loan payments, which are financial obligations.
Mahoney said the wisest move would have been to continue setting money aside for student loan payments every month, especially since most of the extensions have been announced shortly before they were set to expire. That cash may be hard to come by (or you may feel like it’s not earning much sitting in a savings account), but eventually it will help you avoid feeling like you’re living paycheck to paycheck with no bandwidth for emergencies.
Alexis Leondis is a Bloomberg Opinion columnist covering personal finance. Previously, she oversaw tax coverage for Bloomberg News.