The New Year could prove to be a difficult one for the wallets of many consumers, especially some college graduates and young families.
Fiscal shocks could translate into shortfalls of several hundred dollars per month in 2022 for some, as monthly student loan bills are expected to pick up in May, prices of food and other items remain high and the future of credit. child tax bill looks extremely grim. .
Many people might make tough choices about what bills to pay and possibly look for ways to work overtime or find better paying jobs to deal with essential bills, such as rent, mortgage, car payments. and, yes, student loans.
Here’s a rundown of what to expect:
Student loan debt could be thrown on the pile of bills
Millions of borrowers faced a looming February 1 date when they would have to start paying down federal student loan debt again. On December 22, however, the United States Department of Education announced a 90-day extension until May 1 of the break on student loan repayments, interest, and collections.
After the Build Back Better negotiations hit a major hurdle earlier in December, we started hearing more jokes about the possibility of another extension. The fear of the potential impact of the omicron variant on the economy also comes into play here.
Once the moratorium is over, those paused federal student loans would accumulate interest again.
About 18 million borrowers will have gone almost two years without having to repay their student loan.
Additional child tax credit money is not guaranteed
Senator Joe Manchin, DW. Virginia, cut a big hole in the financial safety net of many families when he declared on December 19 that he was adamantly no to the current Build Back Better Act. What happens in the future remains unknown. Families facing financial challenges will need to plan what they will do without the monthly payments.
On average, families plan to lose about $ 444 per month on the expanded child tax credit, according to data from December.
The monthly child tax credit payments were introduced as part of the US bailout, which was enacted last March. The child tax credit also became fully refundable, so even families with no income could fully benefit from it, which is essential to tackle child poverty.
Monthly payments were to be temporary and run from July 15 to December 15.
Biden’s Build Back Better package raised hopes of extending monthly payments until 2022. And it would make full credit available to children in families with little or no income permanent in one year.
But without Congressional action, the child tax credit comes down to $ 2,000 per child – and there is no provision for monthly payments. This is one of those cases where families need to start the new year by preparing for the possibility that the child tax credit will not be as good as it was in 2021.
Plan to pay more
Many consumers anticipate that they will need to factor rising prices into their budgets, according to grocery store forecasts from a new KPMG Consumer Pulse survey for 2022.
According to the survey, consumers expect to spend an average of $ 611 per month on groceries in 2022, up from $ 532 per month in 2021. Price increases in the Midwest are even worse for consumers. In the Midwest, the consumer price index jumped 7.3% in November from a year ago, beating the national gain of 6.8%.
Consumers have limited plans of attack here: find cheaper alternatives, shop for comparisons, pay more attention to sales and coupons, stop buying certain items altogether, and sometimes just donate more money to buy what you need.
âInflation is probably already peaking at the end of 2021,â said Bill Adams, senior economist for PNC Financial Services Group. He expects demand to cool for home appliances, electronics, etc. which will limit price increases there.
A recession is not in the cards for 2022, according to many economists, but they recognize that our financial health will depend on the trajectory of the virus.
It’s not all dark
We envision less stimulus in the economy if the child tax credit ends and student loan repayments start again – and many families facing financial challenges will feel like it is. who pulls out the hardest.
But Adams noted that there was a lot of stimulus money left in state and local government accounts that have yet to be released. He also expects supply chain issues to improve in 2022.
âAuto sales in particular are expected to be a bright spot in 2022 as automakers put the chip shortage behind them and ramp up production,â Adams said.
The rules of the game will definitely be different in 2022 compared to 2021 and families will have to adjust their budgets accordingly.
Tompor is the personal finance columnist for the Detroit Free Press.