On March 20, 2020, the Federal Student Aid office began providing temporary relief via a loan payment pause and 0% interest. The COVID-19 pandemic pause on student loan payments is ending on Sept. 1, 2023. This means that starting in October, those with outstanding student loan debt will need to start making payments again.
If you haven’t been making payments during the pause, don’t panic. There are a few things you can do to get ready for the restart.
What Happens Next?
If you have a student loan you will receive a bill at least 21 days before your payment is due. If you moved during the pandemic, make sure your address is up to date—you don’t want your payment to be late because you didn’t get the notice. It is worth making sure your contact information is up to date.
Make your payment as you did prior to COVID. If you have an EFT or automatic payment plan from your bank that was turned off, be sure to turn it back on. If you changed banks, you will want to update your account information and link the new bank.
Are You Eligible for Forgiveness?
There has been a lot of information out there in the news and there have been a lot of changes this year. You may recall there was an executive order to forgive student loan debt that got overturned by the Supreme Court. There are also other potential programs in progress that may forgive some of your debt, but you can’t decide not to pay in hopes that it gets forgiven.
You may want to proactively look at public service loan forgiveness, if you qualify, and explore other programs that may become available. The lesson here, though, is to pay on time until you have confirmed you are eligible for forgiveness and your payment has been modified accordingly.
Scams Abound
Be wary of anyone who reaches out to you to offer an unsolicited “Pandemic Grant” or a “Biden Loan Forgiveness” offer or anything like that. If you haven’t verified via a trusted source that something like this is happening, it’s probably an attempt to scam you out of money.
Don’t Have the Money?
Many people adjusted to life without student loan payments and added car loans, bought a home or added unsecured debt. Now that the student loan payments are coming, you may be wondering how you will be able to pay. Here are some ways to find the money:
Look at your overall budget: Do you have subscriptions, a car payment you can’t truly afford, costs for dining out, or other enjoyable indulgences that aren’t necessities? What do you believe you can cut to make room for the student loan? While it may be painful to skip date night on Friday, or going out for drinks with your friends, there are ways to find extra money in our budgets that we can use to make these payments.
Goal shifting: Are there goals that you were saving for like a trip, a new car, or a big upgrade on your home? Perhaps you can postpone or scale some of these expenses back.
Temporary deferment or forbearance: If there are circumstances that prevent you from paying some or all of your student loan debt, you can apply for a deferment or forbearance, which could turn off the payments for a period of time to help you get back on your feet. Your balance will go up though due to interest accruing.
Consolidation: You might find it easier to consolidate all of your loan payments into a single loan, which can make payments streamlined. Be sure to consider the interest rate of the refinance compared to what you are paying now, as this could be a more expensive option for some.
Income-driven repayment: You can apply for an income-driven repayment plan. These plans base your monthly payments on your income. This can potentially make your payments more affordable.
If you’re still struggling to make your payments, you may want to consider seeking professional help. A financial advisor can help you create a budget and develop a plan to pay off your student loans.
To recap, here are some tips for managing your student loan debt:
Make a budget and stick to it. This will help you track your spending and make sure you have enough money to cover your monthly payments.
Pay more than the minimum payment. This will help you pay off your debt faster and save money on interest.
Consider refinancing your loans. This may lower your interest rate and make your payments more affordable.
Don’t give up. It may take some time to pay off your student loans, but it is possible. Just stay focused and keep making payments.
(Disclaimer: The information contained in this article is not tax, legal or financial advice. With any major financial decision, it’s important to consult a financial advisor.)
