Right now, 8 million borrowers have their student loan payments on hold due to the legal challenges of the Biden administration-led Saving on a Valuable Education relief plan. But that’s not the case for millions of additional borrowers squeezing their monthly student loan payments into their budget during the holidays.
This time of year can add up quickly — especially if there’s the expectation among family members that you’ll give memorable gifts to everyone. The pressure can push you to overspend and delay paying certain bills that you know will be around after the holidays and beyond.
As a student loan expert, I never recommend letting nonessential spending put you in a bad financial situation for months or years. But I also know that accidents happen. If you’re worried about affording the holidays and your student loan payments, here are some tips to prioritize both and what to do if your payments fall behind.
Don’t skip a student loan payment to have extra for shopping
Missing student loan payments can have serious consequences, like negative reporting to the credit bureaus. That can hurt your credit score and history. And you’ll still need to catch up on missed payments, which may incur late fees and accrued interest.
If you’re worried your monthly student loan payment is too high, take a look at federal student loan income-driven repayment plans. These plans will base your monthly payments on your income rather than your outstanding balance, which could lower your monthly payment.
Enrolling in autopay can help you prioritize your student loan payments, and potentially secure a small interest rate reduction. However, it’s crucial to manage your bank account balances to avoid overdrawing — which could lead to fees and other complications if you don’t have sufficient funds to cover your scheduled payments.
Read more: How the Fed’s Interest Rate Decisions Impact Student Loan Borrowers
Be honest about your budget
The holiday season can be a high-pressure and expensive season. Once you fall behind, you may begin spiraling and take on more debt to get by — like Buy Now, Pay Later plans and credit cards. One of the biggest “wealth killers” is debt, especially high-interest credit card debt, according to Edvisors. Not just during the holiday season, but for all spending, the goal is to avoid overspending to help maintain your financial stability.
It may sound obvious, but reviewing your budget before shopping the holiday sales is crucial to staying on track. Look for any restrictions, such as monthly bills and necessities. Figure out what’s left to help determine a workable budget for your holiday shopping.
Set gifting expectations with your friends and family
Practicing loud budgeting can come in handy if your budget is tight. This social media trend encourages you to let your friends and family know that you’re prioritizing certain financial goals, like paying your student loans, and letting them know you may need to opt out of costly events or look for affordable alternatives.
What does that look like? Here are a few suggestions:
Gift exchanges
Instead of buying everyone on your list a gift, encourage your friends or family to participate in a Secret Santa or White Elephant. This allows you to buy fewer gifts while still celebrating with your loved ones.
One of my favorite family traditions is the white elephant gift exchange I have with my cousins. We set a gift limit ranging from $10 to $25, to take the pressure off gift buying. It’s a fun time for everyone and it allows us to save some money in the process.
Find deals that fit your budget
If you narrow down your gift list, be sure to keep your eye out for deals to save even more. I always have great luck shopping at my local wholesale club. I’m able to get deals on gift cards, like two $50 gift cards for $80, an automatic 20% savings. Just be mindful that these known deals may sell out as the holidays approach, so plan ahead and remember to stay within your budget.
Give gifts that are memorable but less expensive
You also don’t have to give gifts at all to enjoy the season. Instead, you could instead mail cards with personalized, heartfelt messages or craft gifts with materials you already have. If you haven’t connected with loved ones in a while, prioritize inviting them for coffee or dinner after the holiday season to put less strain on your budget over the coming weeks.
Read more: Don’t Give in to Gift Guilt This Holiday Season. Expert Tips to Curb Debt and Overspending
What to do if you fall behind on your student loans
If you accidentally overspend and you can’t keep up with your loan payments, it’s time to call your loan servicer or lender. Federal student loan programs may have options to change your repayment plan or postpone payments.
On the other hand, private student loan lenders may be able to place your loan in a postponement status to give you some breathing room. Just make sure you understand how that will affect your loan and its benefits going forward. For example, interest may continue to accrue. But it’s best to call before you fall behind because the longer you wait, the fewer options you may have.
More money advice for the holidays
