In recent news, The U.S. Department of Education announced that student loan payments will resume in October 2023. There have been statements in the past declaring that student loan payments would resume only to be paused again; but this latest news comes as The Supreme Court ruled against President Biden’s forgiveness plan to wipe out student loan debt in June, and at a time when most are returning to a somewhat regular, but different way of life post-COVID. That likely means that there will be an end to any further delays in repayments, indefinitely.
In March 2020, when the WHO declared COVID-19 a pandemic, it was announced by the Trump Administration that federal student loan payments would be paused and interest rates would be at 0 percent. This gave people a break from paying their loans and a chance to focus on more pressing matters, such as health and job security. This break, which initially was thought to be a short-term reprieve, turned into a pause that has lasted three years. The three-year pause ultimately saved people an average of $15,000 in student loan payments, according to higher education expert Mark Kantrowitz.
On the list of recurring bills, the average person has to cover housing, transportation, food, utilities, childcare, clothing, insurance, monthly memberships/subscriptions, and more. Based on annual income, an addition to this list can mean the difference between living paycheck to paycheck or having extra at your disposal. Whatever the circumstances are, including student loan payments back into one’s monthly budget can really alter a person’s sense of financial stability and create mental stress and anxiety. According to Cindy George, senior personal finance editor at GoodRx, it is normal for people to feel scared and anxious about the recent announcement. As the world has changed within the last three years, people’s lifestyles have changed too.
“During the pause, people have become very strategic. They are in a better financial position without prioritizing student loans,” George says. “People have been able to level up in their careers, jobs are paying more, and there’s a lifestyle creep. Psychologically, it feels great to be better compensated and it brings a relief in every area of your life. But now, with the payments beginning to resume soon, we have to tie student loans back into our spending.”
Lifestyle creep, which can be a gift and a curse, happens when an increase in income leads to an increase in spending on living expenses and nonessentials. This can mean paying for a nicer apartment, buying more luxury items, and/or doing more traveling. For people who have been experiencing lifestyle creep, this behavior could have shifted their mindset when it comes to how they view money and in turn, altered their relationship to it. While lifestyle creep has been helping a lot of people feel more at ease with a quality of living, it could have perpetuated money management habits that could be harmful in the long run. According to The Consumer Financial Protection Bureau, with an increase in mortgage loans, auto loans, and credit card loans, when student loan payments resume this fall, half of borrowers will have at least 10 percent more debt than they had before the pause. Knowing this, having to rethink your financial structure can really take a toll on one’s mental health, as well as their wallet.
“I want people to know that, it is not just your imagination. If it makes you sick to your stomach, that in October, the payments are coming back, that’s real. That is scary for a lot of people because it is going to change their life.” George noted.
A Northwestern Mutual study found that 44 percent of Americans have mentioned that finances were their number one stressor, with more than one in four feeling depressed about finances at least monthly and two out of 10 feeling depressed weekly, daily, or hourly. Financial distress can not only cause anxiety, depression, fatigue, and lack of sleep. It can also negatively affect your quality of work and your relationships, personally and professionally. When thinking about financial debt and realizing it can be linked to a person’s overall well-being, there are certain signs that we need to be aware of in order to recognize the stress and deal with it.
“The first symptom I have seen with my clients is excessive worrying. They are constantly worrying about something that hasn’t even happened yet,” says certified clarity and stress management coach, Toscha Dickerson, CPLC. ”The second symptom is restlessness. We have a lot of people that lose sleep because they are thinking about how they are going to pay their debt. I have also seen other clients having difficulty concentrating at work and other areas. These are some of the signs that show you that you may be on the verge of a mental breakdown.”
But before you allow the stress of upcoming repayments to get the best of you, Dickerson suggests three ways people can improve their relationship with finances, have more control of their situation, and in turn, minimize the worry as student loan debt looms.
Think Positive Thoughts
If we want to shift our mindset about money from negative to positive, people have to think of positive thoughts. Dickerson mentions the importance of focusing on the bigger picture, including why you sought higher education and ended up needing to take on those loans.
“Remember why you went to school in the first place. Whether it was to better yourself or encourage your children to see you win, that puts a smile on your face,” she says. “Having a positive reminder on why you went to school, it decreases the level of stress and brings a sense of ease.”
Develop a Strategy
To decrease the feeling of anxiousness, it is helpful to have a plan. When we want to feel better prepared for situations, before they come up, creating a plan, and finding the right people to help you with said plan is essential. Dickerson says that if we can do this with our finances, we increase our chances of being more optimistic and having better outcomes.
“The loans are not going anywhere. When we set manageable and realistic goals, we can tackle financial goals little by little. But with this strategy, you have to be committed to it,” she notes. “Also, you must ask for help. There are people whose job is to coach others through student loan payments. So, if you need to contact someone, speak with a professional who is able to give you options. That way, you are able to choose what works best for your income bracket.”
Be True to Who You Are
Being stressed about money should not be the only thing we are focused on. We must remind ourselves that finances should not dictate how we enjoy our lives. While financial payments are part of our everyday lives, so is self-care, hobbies, and doing things that we are passionate about. There are other areas that need our attention. When we continue to live a fulfilling life as well as being mindful of our financial obligations, Dickerson believes it is one of the best ways to stay in control.
“You must be living a life that is authentic and not trying to live above your means or compete with others,” she adds. “You have to make sure that you are full, happy, and you are in control.”