Broker Check

Monday Money Report

| July 17, 2023

Last week the market fell on Thursday with the release of jobs data, then rebounded on Friday for a slightly down week. Why do employment numbers impact the market so much?  The market is concerned about the Federal Reserve Bank continuing to increase rates, as that increases the risk of a recession. While the interest rate hikes have started to reduce inflation, the job market has proven resilient, as the number of jobs is growing, and wages are still going up as well, although not as quickly. Many analysts are predicting another rate hike later this month.

Also in the news is the recent Supreme Court decision striking down student loan cancellation.  In August, the pandemic forbearance ends as well, so payments will start soon.  If you have loans and haven’t been paying on them, what now?

First, make sure you have access to your loan servicer, or the company you will be making payments to. Now is the time to set up your log in and review your loans and your contact information.  If you don’t know who your loan servicer is, check the portal.

The CFPB, or Consumer Finance Protection Bureau, said recently that half of student loan borrowers have at least 10% more debt than before the pause on student loan payments, and another 8% are already behind on other loans.[1]  If this is you, now is the time to reach out to your loan servicer to discuss options, including deferring payment.  Be aware that your loans will typically start accruing interest, so your principal will increase every month you aren’t paying on the loans.

If you’re worried about paying your loans, look into the income-driven repayment plan. You’ll have to apply for the program, but it limits your payments to 10-20% of your discretionary income, depending on the plan you’re in. All of these plans also forgive any remaining balance after 20-25 years.

Overall, this is a good time to assess your budget. Track your spending to see where you can cut costs. You may need to take on a second job or side hustle to cover the extra payments. If you work for the government or a non-profit organization, check into the Public Service Loan Forgiveness program.  The State of Maryland also has a loan forgiveness program that’s tied into purchasing a home called Maryland SmartBuy.  And next year, employers can treat student loan payments as if they were 401(k) contributions when calculating the employer match.

Your action item this week is to check your phone for subscriptions that are automatically renewed and cancel any you don’t want to keep.

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CovingtonAlsina is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

[1] USA Today, The student loan payment pause is ending. How borrowers can prepare by Alia Wong and Nirvi Shah -6/27/2023