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- [00:00]
Ailsa Chang
More than 5 million. That is the estimated number of borrowers who are in default on their federal student loans, according to the US Department of Education.
- [00:10]
Juana Summers
We would encourage everybody at this moment.
- [00:12]
Mandy Woodruff Santos
If you've been disengaged from your student.
- [00:14]
Juana Summers
Loans, especially going back before the pandemic, to just see what you owe and who you owe it to.
- [00:19]
Ailsa Chang
That is Mike Pierce of the Student Borrower Protection Center. And here's what's going on. The Department of Ed announced earlier this month that its Office of Federal Student Aid would resume collections. That means it can start taking funds out of borrowers, tax refunds, Social Security benefits and wages in an effort to collect on defaulted student loans. The issue a lot of borrowers face now is how to make room in their budget for something that wasn't there before, especially when things in the US Right now are economically a bit dicey. And not just for student loan borrowers. Groceries cost a lot more than they did in 2020.
- [01:00]
Juana Summers
You can see the impact of inflation most clearly these days at the grocery store.
- [01:05]
Mandy Woodruff Santos
The cost to feed families is so high that more Americans are taking out.
- [01:09]
Ailsa Chang
Short term loans just to buy their groceries. Tariff disputes make it not only difficult to plan future purchases, but finding everyday items at an affordable price is getting harder. President Trump a short time ago telling.
- [01:23]
Mandy Woodruff Santos
Walmart that the company should, I'm quoting.
- [01:25]
Juana Summers
Now, eat the cost, end quote, of higher tariffs. The comments come after the retail giant.
- [01:31]
Ailsa Chang
Said this week that it would raise prices because of Trump's tariffs being too high. And whether it's your mortgage or your rent, housing remains expensive. Plus, the job market is tough. And that includes for new college grads.
- [01:47]
Mandy Woodruff Santos
Many graduates were won into a bottleneck.
- [01:49]
Juana Summers
Of entry level openings as companies hold hiring levels steady.
- [01:53]
Mandy Woodruff Santos
Something like this can be really challenging. So the first thing I would say is to take a deep breath.
- [02:00]
Ailsa Chang
Unpredictable inflation, added expenses, a volatile stock market. The health of the US Economy is anything but certain right now. So how can you manage? Well, coming up, we'll talk to a personal finance advice expert to help you navigate current economic hardships. From NPR, I'm Ailsa Chang. It's consider this from NPR. The U.S. economy is in flux. And for millions of Americans, a new line item in their budget includes repaying federal student loans. So how do you make room for that, assuming things are already pretty tight. But we put that question to Mandy Woodruff Santos. She's a longtime financial journalist and host of the Brown Ambition Podcast, a weekly money and career podcast. And she spoke with my co host Juana Summers about how to manage new expenses along with your current ones.
- [03:08]
Mandy Woodruff Santos
Something like this can be really challenging. So the first thing I would say is to take a deep breath and I want you to pull out your spreadsheet. For the more technically savvy and trusting like me, I actually use a budgeting app. It actually keeps tabs on all of my expenses. It gives tips on subscriptions that I could reduce, subscriptions that have gone up in cost. And you need to look at your budget, you need to look at where is this money going to be coming from. And I really hope that you have room in the budget for this expense. If you don't, then you have to start tackling the question of, all right, what am I going to do and how am I going to afford these student loan payments? So if your budget is already really thin, if you've already given up your door dashes, 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.
- [04:14]
Juana Summers
Can you break some of them down for us just as simply as you can?
- [04:18]
Mandy Woodruff Santos
It's really complicated. You know, I put them in a couple of buckets. So you have your standard repayment plan. So literally 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 and this is how you can get away with paying the least amount of interest possible with your student loans. Now, for people who are graduating with five figure debt, maybe even more than that, that monthly payment may be way too much. And in that case you want to go to your second bucket of student loan payment options. So then you get into your income based repayment options. The long and short of it is that these plans are going to give you an extended timeline to pay back your loans. And they have this carro 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 at the end of taking advantage of one of those.
- [05:38]
Juana Summers
Okay, 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?
- [05:51]
Mandy 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.
- [06:06]
Juana Summers
Okay, 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. Because, I mean, for many people, paying off the principal just might not be an option right now.
- [06:21]
Mandy Woodruff Santos
You know, 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 and 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, you can't do that within 12 months. Then you have other options. You can look at a debt consolidation loan. And I love a credit union. They have a max of 18%.
- [07:11]
Juana Summers
Interesting. Did not know that.
- [07:13]
Mandy Woodruff Santos
Love an interest rate cap. 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.
- [07:26]
Juana Summers
The other thing I think we have to talk about in this conversation is the job market because there's just been so much uncertainty for American employers in the midst of all of this tariff chaos. There have been layoffs across the federal government in Washington, D.C. and across the country. And many people out there listening to us, they may be nervous about keeping their jobs. Others may be ready to move on, but not sure if it's the right choice. So give us a couple ideas here. What should people understand as they're trying to figure out future career planning?
- [07:52]
Mandy Woodruff Santos
Now is a good time to like, zoom out and look at the historical picture of the job market. There are going to be these valleys and I think it's unfortunate. We are in the middle of a valley right now, but we tend to rise. So I would say keep your mindset strong, try to keep your head on straight and understand that just because things are difficult now, they it won't necessarily be difficult forever. And there are some steps you can take now to bolster your future career and to bolster your career plans. One of those things is to still keep an eye out for open opportunities that are interesting to you. I don't want people to start making quote unquote safe choices by staying at a quote unquote stable career path or stable job because they're afraid of what may happen on the open market. I think when you do that, you're limiting the information you're getting about your current market rate. You don't know what the interview process is like. Like your skills are going to atrophy when it comes to networking and speaking with other potential hiring managers. So as much as you can, as much as you have patience for, you know, put your resume out there, let people know what you're interested in. It may take a lot longer to get to an interview to hear back from a hiring manager, but at least you'll be doing something to sort of keep your those skills of job searching warm and flexible. And for those who are unemployed right now, it's probably been the most stressful period of your career so far. And I have so much compassion for you. It's a long slog. I think the total time people are spending looking for jobs now is around six months according to the latest labor statistics. And that is a very long time. But I say that so that people understand it's not going to be an overnight thing and to put a little bit less pressure on yourself to have something immediately. And in the meantime, it's going to be even more important for job seekers to like, talk to one another, work, talk to your peers, get opportunity, look for any chance you can to put yourself in a room where you're going to be in community with other professionals who are potentially going to have the keys to future opportunities and at least keep your name out there and keep that network warm and those relationships, you're still investing with them to set yourself up for success later.
- [10:17]
Juana Summers
Mandy, 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?
- [10:37]
Mandy Woodruff Santos
I'm so glad you asked me that question, because I truly believe a lot of people don't need a financial advisor. They need a good mental health counselor, a therapist, whatever you need. You need to be reaching out for types of resources because the people who will survive, not just survive, but thrive in times like these are the people who are going to have a village around them, helping them with their stress management. And it really takes a village. You may even find that a therapist isn't enough. You may need a group therapy to supplement what you're going through. You may need to make friends, more friends to build your community, invest in your relationships 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.
- [11:29]
Ailsa Chang
That was Mandy Woodruff Santos, personal finance expert and host of the Brown Ambition Podcast, a weekly money and career podcast. This episode was produced by Briana Scott. It was edited by Sarah Handel, Courtney Dorning and Nadia Lancy. NPR's Rachel Treisman contributed reporting. Our executive producer is Sammy Yenigun. It's Consider this from npr. I'm Ailsa Changing.