Last week, the markets declined by about 1%, but are still near the record highs set previously. Jobless claims continue to decline, but investors appear worried about the impact of Covid variants on the economy, and the potential for inflation to cause shifts in the Fed’s accommodative policy.
Another area of concern in the economy as a whole is the large amount of student loans. During the pandemic, the federal government put subsidized loans into forbearance, meaning no interest accrued and no payments were due. This has been extended through January of 2022. If you have these loans, you may want to focus on paying down higher-interest rate debt now and building your emergency savings. If you’re already in a good position except for the loans, you can get ahead by continuing payments as everything you pay is going to reduce the balance owed.
I’ve had many clients ask about the possibility that the federal government will just forgive their loans. While that is certainly possible, it is unlikely. Taxpayers who never went to college, or paid their way through school, or have paid off their loans, will probably not support paying off other people’s student loans.
There are three programs that you can take advantage of. The first is Public Service Loan Forgiveness. If you work for a government agency or a non-profit, and make 10 years of payments, the remainder of your loans may be forgiven. You do need to have your employer certify your employment and file those forms, and it can be a hassle. But if you calculate that amount you will save compared to the time spent, it’s a pretty generous return on the time you invest.
The Maryland Higher Education Commission, a state agency, offers a tax credit for Maryland residents who incurred at least $20,000 of student loans and have at least $5,000 remaining. The deadline to apply for this year is Wednesday, September 15th. The credit must be paid towards your student loan balance and private loans are included in this program.
If you’re a first-time homebuyer, Maryland’s Smart Buy program offers a student loan payoff of up to $30,000 when you buy a home in a targeted area. There are numerous rules and limits to this program, but it may be a good option to pay down debt and get a jump start on homeownership. You do have to stay in the home for five years as part of the program.
On the other end of things, the FAFSA, or Free Application for Federal Student Aid opens October 1st. If you have a high school senior, now is a good time to discuss colleges and how you are going to pay for school. Is it worth going into serious debt for school, or can you compromise by attending a community college first, commuting to a local school, or staying in state? Another discussion point is the choice of major, and what the job market looks like for graduates in that career field. Before you go into debt for a degree, consider the potential return on the investment you are making.
Your action to take this week is to meet with your home and auto insurance agent. Discuss your coverage limits, and the potential need for a personal article floater, increased liability coverage, or an umbrella policy. You can also register for more educational events on our website at covingtonalsina.com. Be sure to check out our Facebook page for more information.
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