Something for parents and younger investors to consider: President Biden recently extended the moratorium on federal student loan payments.

That move provides borrowers with another five months of relief, but it appears likely the moratorium will expire on Jan. 31, 2022. That’s the bad news, but there are some silver linings for advisors and their clients.

“This extension is an opportunity for financial professionals to connect with clients who could potentially benefit from the continued pause in monthly student loan payments and 0% interest rates,” writes Nationwide’s Mark Hackett. “With the window open for another five months, borrowers may be able to revisit their debt payment plans and potentially free up income that can be directed toward other financial priorities.”

While five months is a decent amount of time to prepare for the resumption of a monthly bill, it’s important that advisors articulate to clients, both parents and younger borrowers, that this will likely be the last time the White House extends this privilege. Five months will also go by quickly, making proper planning essential.

“Many of the decisions made in Washington D.C. can have trickle-down impacts on your clients’ financial plans. Because of the uncertainty around what direction politicians may choose, clients often feel paralyzed when making their own financial planning decisions,” adds Hackett.

Perhaps one of the most fertile grounds for advisors to initiate conversations with clients regarding the end of the student loan moratorium is simply getting into the investing game. Knowing that payments are returning, some younger clients may forego market participation while parents that borrowed on behalf of their kids may not contribute as much to retirement plans.

“For example, uncertainty about the future can create inertia that may prevent clients from starting to invest,” concludes Hackett. “The cost of waiting for the right moment can cost thousands of dollars in lost savings over the long term. A $5,000 contribution made today to a tax-deferred retirement account (e.g., a 401(k) or IRA) would grow to more than $50,000 in 30 years, assuming an 8% annual growth rate. However, waiting just five years reduces the ending account value by over 30%.”

Those are eye-catching data points and they underscore the importance of the financial advising industry in general, particularly against the backdrop of returning student loan obligations.

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