An Update On Federal Student Loans, Cash Is NOT Trash, and Consolidating Old Retirement Accounts

Aug 10, 2023

Federal Student Loans:

After more than three-years, federal student loan borrowers will start making payments again…

Here are some things to keep in mind:

1. When does repayment begin?

Interest will begin accruing on your loans September 1st. But payments will not be due until October. You'll receive your bill at least 21 days before it's due. The interest rate for your federal loans is typically fixed, and should not change even during today’s rate environment.

2. What is the new SAVE repayment plan?

Although student loans were not cancelled, there are some initiatives to keep in mind. The SAVE plan is an Income Driven Repayment plan that is replacing the REPAYE plan. This plan will offer the lowest monthly payment (based off your income) with a handful of other benefits.

Additionally, for those that work in the public sector, specifically, non-profits, the military, or federal, state, Tribal, or local government, explore the Public Service Loan Forgiveness (PSLF) program.

You may be eligible to have all of your student loans forgiven through this program after making 120 monthly payments.

3. How do I prepare for it?

Double check where your student loans are held. Up to 30 million borrowers now have a different loan servicer than they had in 2020 (mine transitioned from MyFedLoan to Ed Financial).

Make sure your contact information is up to date so that you can stay notified about any changes. Sign up for auto pay, most servicers offer a 0.25% rate discount if you set up automatic payments. Understand what your monthly payment is and begin building that number into your budget.

Cash Is NOT Trash!!

Interest rates are at their highest level in more than 20 years. If you are someone with a lot of cash, and not much debt, are you taking advantage of this?

If not, here are four ideas for you to make the most of this environment:

Set up a high yield savings account: No costs to open an account, FDIC insured up to 250k ($500k of FDIC insurance for joint accounts), money can be accessed at any point. The only difference from your savings is you are actually earning some interest! Current rates are well above 4%. Some services offer even higher rates (https://www.maxmyinterest.com/)
Treasury Bills: A Treasury Bill (T-Bill) is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of one year or less. Current rates are above 5%. You do not owe state income tax on the interest you earn!
Certificate of Deposits (CDs): These can be a great option for cash you may not need for 12-36 months, but remember that you are locking your money up for a specified amount of time. Should you need access to these funds prior to maturity date, you may have to pay a penalty. Current rates are above 5%.
Stock Market: The best time to buy stocks is when you have the cash available. I wouldn’t recommend putting money into this market if you may need it in the next 6-12 months. Additionally, consider purchasing money market funds (for high-income earners, tax-exempt money market funds are very attractive) or long-duration bond funds. The yields on most of these investments is over 5% and can provide steady income in your portfolios.

Taking proactive steps can lead to rewards. If you are someone who has a lot of cash sitting in your checking or savings account, please reach out so I can help you get this money working harder for you.

Switching Jobs? Track Your Retirement Accounts:

Layoffs and employees switching jobs seem to be on the rise as of late. These times can be chaotic and so many things are going through your head.

One item that is frequently forgotten by those switching companies - your 401k or 403b plan.

An estimated 900,000 workers lose track of their 401k plans each year…

I’ve hit on these retirement accounts before, but I’m a huge proponent of consolidating retirement plans when possible.

You do have three options when you leave a company regarding your retirment account:

Leave it where it is, money stays invested.
Roll it over to your new 401k, if possible.
Roll it over to an IRA.

I always recommend going with the second or third option, that way you don’t forget about these and you are able to keep track of where all of your accounts are.

I’ve done hundreds of rollover calls with clients and they can be very painful trying to track down old statements, trying to remember old security questions, or maybe your personal information has changed (emails, addresses, phone #’s, etc.)

Get this done while it’s still fresh on your mind.

Questions? Reach out or leave a comment below:

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