Reminder control: when to expect your payment
Your stimulus check could hit your account this week.
Staff Video, USA TODAY
Many Americans who have obtained or expect to receive a stimulus payment under the latest economic relief plan for the COVID-19 pandemic may also have or know they will have expenses or debts related to the COVID-19 pandemic. university – so what’s the best thing to do with a check for maybe $ 1,400 under these circumstances?
The answer will really depend on each individual’s financial situation, said Roberta Johnson, director of student financial aid at Iowa State University – but there is key and universal information.
An additional context to consider – the temporary suspension of payments and interest on federal student loans owned by the US Department of Education, enacted in March 2020 due to the pandemic, was extended in January to last at least until September 30 of this year.
President Joe Biden has also previously declared his support for Congress to write off $ 10,000 in personal student loan debt, although he is rejected appeals from fellow Democrats to cancel a value of $ 50,000. Either way, it is not clear if or when the loan cancellation can occur.
Americans collectively owed more than $ 1.7 trillion in student loan debt by the end of 2020, according to the Federal Reserve, and the average 2019 public or private nonprofit college graduate owed an average of $ 28,950, according to The Institute for Access to and Success in College.
Whether it was going into debt or trying to save for future college spending, Americans have also had to think about it all during the economic and social upheavals and job losses of the pandemic that have boosted economic stimulus packages in the first place.
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Johnson could not immediately estimate how many ISU students would get themselves a stimulus payment compared to a financial dependent in their family. She said the only way to know if a student is a dependent is if they have completed the Free Application for Federal Student Aid, or FAFSA, and not all students are or feel they are eligible. the need.
Anyone who handles a stimulus payment, Johnson said that if a student goes into debt in college and knows they’ll graduate with more debt than the stimulus could cover, it’s important to consider how long they’ll be. remains before graduation and what type of debt the student has before deciding what to do with a stimulus payment.
A freshman three or four years early may want to put money aside for future expenses, “the idea being that if you have that cushion available to you, you potentially won’t need it. to borrow that much in the future, ”Johnson said.
Most federal student loans have a post-graduation grace period of six months before payments are required – a grace period that, for a class of 2021 senior graduating in May, would end after the due date. current end of the temporary suspension of payments and interest in place due to the pandemic.
Johnson said a student graduating in May who is considering relocating to another city could take more advantage of his stimulus by earmarking it towards expenses such as first and last month rent that may soon fall due. Someone who stays close or won’t have those expenses might want to assess the accrued interest on their loans instead.
Subsidized loans do not carry interest while a student is in school. Johnson therefore said it didn’t make as much sense to pay off that debt early in his college career as it did to set up a savings plan.
However, she said if someone was borrowing heavily through unsubsidized or private loans that accumulate interest while they were enrolled in school, it might be better to pay that interest back, especially if the interest on a private loan is recapitalized regularly and is added to the loan balance.
A family with a child years away from college but anxious to save for their child’s education might also be wondering how best to use a stimulus payment.
The safest option is a savings account, but these aren’t earning much interest at the moment due to the economic policy response to the pandemic.
A certificate of deposit will likely have a higher interest rate than a savings account, but a 529 plan will be even better, Johnson said.
She said that 529 plans can be invested and set based on a family’s risk tolerance for their investment. If a family invests even a few hundred dollars several years before their child reaches college age, it could really grow their money.
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Johnson said the ISU’s financial aid office has a few financial success coaches – counselors with additional training in financial literacy – and that any student can ask questions about financial issues, regardless of whether they are finished. FAFSA or be eligible for financial assistance.
Most office appointments are still done virtually.
Anyone who missed the deadline for priority assistance to complete their FAFSA can still at least fill out the form, and Johnson said it might be good to have the form on file in case circumstances change and someone would need financial help when they hadn’t done it before.
She also said that because the stimulus payments are not taxable, this income should not affect a person’s eligibility for financial assistance.
Eligibility for financial aid through the FAFSA for the current 2020-21 school year is based on information from 2019.
“We know a lot has happened in 2020, and the families’ incomes they earned in 2020 might not look like they were in 2019,” so Johnson added that families who have experienced radical changes in their financial situation can contact their office to submit an appeal to the Department of Education to have their change in circumstances factored into their eligibility for assistance – a process known as a professional judgment review .
Phillip Sitter covers education for the Ames Tribune, including the Iowa State University and PreK-12 schools in Ames and elsewhere in Story County. Phillip can be contacted by email at [email protected] He’s on Twitter @pslifeisabeauty.