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Student Loan Payments are Coming Back: How to Get Ready!

If you’re among the millions of borrowers who took advantage of the hiatus on federal student loan payments, it’s time to tighten your belt. Repayments will begin October 1st, so we wanted to provide you with some tips and tricks to make the transition as easy as possible. The first step is to determine who your loan servicer is and how much you owe. They estimate over 17 million student loans have been transferred since the pandemic hit in 2020, and another 13 million may change hands by the end of the year. To find out who your student loan servicer is and how much you owe, you can start by logging in to your account at StudentAid.gov. This website provides a list of all your federal loans and details about them, such as the service provider’s name, how much you’ve paid, and your remaining balance. Make sure your contact information is correct, so you’ll receive important notices. If you have trouble accessing your account or need more information, you can contact the Federal Student Aid Information Center at (1-800-433-3243).

The next step will be for you to determine which repayment plan or forgiveness program you may want to consider. You can certainly elect to make the normal monthly payments (which will amount to less interest over time) or consider these other options……One option is the Income-Driven Repayment (IDR) plan, which adjusts your monthly payments based on your income and family size. Another option is the Public Service Loan Forgiveness (PSLF) program, which forgives the remaining balance on certain loan plans after you’ve made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for an eligible employer. You can determine whether your employer qualifies for PSLF by typing in your organization’s name at https://studentaid.gov/pslf/employer-search.

There are also other forgiveness programs available for specific professions, such as teachers, nurses, and military service members. Additionally, some states offer their own loan forgiveness programs. You can find more information about these programs on the Federal Student Aid website or by contacting your loan servicer. Also, if you are currently unemployed you may be able to consider unemployment deferment. As you explore repayment options, be wary of any offers to refinance, as the only way to refinance a federal loan is to take out a new private loan to pay off the existing student loan balance. Although a private loan may have a lower rate, you’re likely to lose many of the benefits that come with a federal student loan, such as potential for forgiveness or forbearance or the opportunity to use repayment plans based on your income. There are options that you can explore to consolidate federal student loans which may offer you the opportunity to stretch out your payments to improve short term cash flow. You can explore these options at StudentAid.gov.

Repaying student loans may feel stressful, but ignoring your obligation will add even more angst to your life in the long term. If you don’t make payments, the loan will eventually go into default which can have disastrous consequences. Your credit will be ruined, which will affect all other outstanding debts and make it hard to get any other loans. Worse, your wages can be garnished up to 15%. As always, if we can help with any questions, feel free to reach out 678-483-3300!