Personal finance has been through some of its roughest times in recent history. As a result of the persistent increase in inflation, the cost of everything from eggs and fuel to real estate, transportation, and housing has increased dramatically.
For almost 40 million borrowers, the burden on their wallets will only increase next month when their federal student loan payments resume after a three-and-a-half-year respite.
Inflation in 2023 has fallen from its high point of 9.1 percent last year to roughly 3 percent, although it is still among the highest rates in the past decade. Housing and basic necessities, in particular, have maintained their prohibitively high prices.
Meanwhile, the federal student loan deferment period that began in March 2020 will end next month. Millions of borrowers will soon be confronted with a challenge they haven’t had to deal with in a while: incorporating this expense back into their budgets.
Americans are employing a variety of strategies, including careful planning, self-discipline, and ingenuity, in order to make it through the current economic climate. Here, we look at five creative responses to the challenges of inflation and rising interest rates on student loans.
1. Gas Apps: Navigating the Fuel Price Rollercoaster
Gasoline prices, although somewhat easing as the summer travel season concludes, remain higher than a year ago. Savvy consumers are turning to gas apps like GasBuddy, Gas Guru, and Fuelio to track down the best fuel prices in their vicinity. These apps also offer rewards programs that help offset the pain at the pump.
2. Deal Groups: Unearthing Hidden Treasures
The hunt for discounts has led many Americans to online deal groups, often found on platforms like Facebook. These communities provide a daily treasure trove of discounted and, occasionally, free items. Rachele Sossong, founder of The Frugal Mom deal group, attests that thousands of products are on sale every day, offering significant savings.
3. Autopay: The Small Savings That Add Up
For student loan borrowers about to recommence payments, enrolling in autopay services is a prudent choice. Many lenders and loan servicers grant a 0.25-percentage-point interest rate reduction for autopay participants. Though seemingly modest, this discount accumulates into substantial savings over time.
4. Bulk Buying: Seizing Opportunities
The adage “strike while the iron is hot” applies aptly to shopping during inflationary times. When deeply discounted items, particularly non-perishable foods and long-lasting essentials like toilet paper, toothpaste, soap, cleaning products, and long-shelf-life medicines, appear in stores, stock up. This strategy ensures long-term savings.
5. Paying Down Debts: Harnessing Financial Agility
During the extended hiatus of federal student loan payments since March 2020, some borrowers capitalized on this break by depositing their would-be payments into interest-bearing savings accounts. As payments resume, tapping into these savings to make extra payments can expedite loan repayment. To maximize this approach, borrowers can contact their loan servicer to request principal-only payments, ensuring that additional funds directly reduce their outstanding balance.
6. Subscription Swapping
In the face of rising costs for streaming services, savvy consumers are exploring subscription swapping. They trade access to one service with friends or family for access to another, allowing everyone to enjoy a variety of content without the burden of multiple monthly fees.
7. Community Gardens
As food prices continue to climb, some communities are establishing communal gardens. These green spaces enable neighbors to grow fresh produce collectively, reducing grocery bills and fostering a sense of community.
8. Credit Card Rewards Optimization
People are becoming more strategic in using credit card rewards. By selecting cards with cashback or rewards programs that align with their spending habits, individuals can offset inflation by earning valuable cashback or points on everyday purchases.
9. Gig Economy Side Hustle
To supplement their income, many are turning to gig economy platforms for side hustles. Ridesharing, food delivery, freelance work, and tutoring are just a few options that offer flexibility and additional income to help counter inflationary pressures.
10. Financial Education Initiatives
Communities and organizations are launching financial education initiatives to empower individuals with knowledge and skills to make informed financial decisions. These programs equip people with tools to manage their finances effectively and navigate the challenges posed by inflation and student loan payments.