JUANA SUMMERS, HOST:
As of May 5, the Department of Education has resumed collecting on defaulted student loans. Borrowers had a long stretch where they didn't have to worry about the monthly hits to their budgets. It started during the coronavirus pandemic and was extended during the Biden presidency. But now that the payment holiday is over, the bills are due, and the timing - it can be tricky. Groceries cost a lot more now than they did in 2020, and so does housing. Tariff disputes make it hard to plan future purchases. So for some help with our personal finances, we've called up Mandi Woodruff-Santos. She's a longtime financial journalist, and she's the host of the "Brown Ambition" podcast, a weekly money and career podcast. Mandi, welcome to the program.
MANDI WOODRUFF-SANTOS: Thanks for having me.
SUMMERS: OK. I want to start off with talking about these federal student loans. And before we get into all the details of these payment plans, I just have sort of a basic practical question. How do you plan for something new, a new expense that you weren't necessarily prepared for?
WOODRUFF-SANTOS: So if your budget is already really thin, if you've already given up your DoorDashes, your Ubers, if you have canceled your Netflix subscription, if you can't possibly reduce any other expenses, then maybe you're looking at taking on freelance or contracting work to increase your income, hoping and asking for a raise at work to increase your income. When you've exhausted those options, there actually are flexible repayment plan options.
SUMMERS: Can you break some of them down for us just as simply as you can?
WOODRUFF-SANTOS: It's really complicated. You know, I put them in a couple of buckets. There's a couple of plans where you can pay off your loans over the course of 10 years. If you do nothing, you're probably on one of these plans. Now, that monthly payment may be way too much, and in that case, you want to go to your second bucket - income-based repayment options. These plans are going to give you an extended timeline to pay back your loans. And they have this carrot that they're dangling at the end of it, which is everyone's favorite word - forgiveness. After 20 to 25 years, these plans have some sort of promise that you will become eligible to have your entire balance forgiven. And they're going to make your monthly payments more in line with what you can actually afford. And it's often one of the options that I recommend people go for first before they go to their next bucket of opportunities, which is something like deferment or forbearance, where you're sort of kicking the can down the road and not eligible for forgiveness.
SUMMERS: OK. So here's a question I have. Say you've already made a choice. You've opted into one of these sort of buckets of repayment plans. And you look and you see there might be a better option out there for you. Is a person able to change their mind and pick a different one?
WOODRUFF-SANTOS: Absolutely. I mean, it may not happen overnight, but you can go to studentaid.gov, find out which loan servicer to call up. And I highly encourage you to get on the phone and talk to a human as much as you can and tell them what's happened so that you can apply for a different plan.
SUMMERS: OK. So that's student loans. And I want to move to a different topic here. We know that when times get tough for many of us, where money may be a little tight, many of us, we turn to credit cards to rely on. Any tips on how to manage it? 'Cause, I mean, for many people, paying off the principal just might not be an option right now, you know?
WOODRUFF-SANTOS: For many people, paying off the principal isn't an option. But if you're looking at these balances and your minimum payments and you do not have the money in your budget to make them, then it's time to look at some alternative options. I often talk to people about balance transfers. And balance transfers is when you get another credit card who's like, sure, Juana, I'll take that $5,000 off your Chase credit card, and we're going to offer you a 0% intro APR for, let's say, 12 months. And that can feel like a huge relief. If you are someone who probably can't pay down your balances if you were to even get an intro APR, then you have other options. You can look at a debt consolidation loan. And I love a credit union. Absolutely shop and compare to get the best rate. But they'll give you a lump sum. Then you'll have one fixed monthly repayment amount that you have to focus on and a fixed interest rate.
SUMMERS: Mandi, last thing before we let you go - I think anyone who's been through it knows that trying to navigate financial hardships can take a big toll emotionally, mentally and physically. Sometimes, it can feel like it's the only thing you can focus on and you can think about. I wonder, is there a word of advice you'd leave us with for people who are just trying to make it through this moment and figure it all out?
WOODRUFF-SANTOS: I'm so glad you asked me that question. I truly believe a lot of people don't need a financial adviser. They need a good mental health counselor, a therapist. You may need to make more friends, to build your community, invest in your relationship so that you can, you know, find out that you're not alone and feel that sense of support, or at least like you have someone to walk along with you on this journey.
SUMMERS: We have been speaking with Mandi Woodruff-Santos, financial journalist and host of the "Brown Ambition" podcast. Mandi, thank you so much.
WOODRUFF-SANTOS: Thanks, Juana. Thanks for having me. Transcript provided by NPR, Copyright NPR.
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