Student Loan Repayments Resume Soon

If you’re among the millions of Americans with outstanding federal student loans, you can expect your payments to resume in May when the pandemic-era pause comes to an end.

Here are six tips to help you prepare for making payments on your student loans once again.

Know Your Loans

It’s probably been a while since you even looked at what you owe. What are your balances? Which types of loans are outstanding? Who services your loans? Do you know the interest rates?

Now is the time to refamiliarize yourself with your obligations. That is the first step in forming a repayment plan. For federal student loans, simply go to the Federal Student Aid website to find all the relevant information.

If you borrowed money from private lenders, there might have been changes to the servicer’s name due to consolidation in the industry during the pandemic. Knowing the ins and outs of your loans can reduce that confusion as well as late fees because of confusion over where to send your resuming payments.

Update Your Information

You can also use the StudentAid website to ensure your contact information—particularly your email address—is correct. That was a problem last year. Why was that?

The U.S. Government Accountability Office sent emails to millions of borrowers. But the GAO reported that about one-quarter of student loan holders do not have valid email addresses. Make sure you are not one of them now.

It’s easy to register or log in and verify that your personal information is accurate.

Determine the Size of Your Payments

Once you have a grasp on your loans and have checked to make sure your contact information is correct, nailing down the amount of your upcoming payment is crucial. The lender should disclose your monthly payment obligation online. If you don’t see it, give the servicer a call to confirm it.

You can strategize about the best path forward. You might feel intimidated by keeping up with other bills, saving for retirement, and having a little fun with food and entertainment expenditures, too! Still, sitting down with a financial advisor to optimize your plan could be worth it.

“Even though student loan payments won’t restart until May, start understanding how it will affect your budget now,” says Stanley Himeno-Okamoto, a Certified Financial Planner and Founder of DRS Financial Partners. “If you’re calculating a shortfall, identify areas you can start cutting back on and ease into your new budget over the next couple of months. It will feel like less of a shock if you can get used to the reduced spending level over time.”

Set Up Automatic Payments

Repaying loans is easier when you don’t have to think about it. That is the beauty of automatic payments.

Much like establishing regular retirement contributions, automated approaches to improve your financial situation helps reduce time and effort. If you were paying back loans with the auto-debit feature before the forbearance period began, you should re-enroll to avoid the risk of missing the first due date.

Understand Other Payment Options

You can review other payment plans using the Department of Education’s (DOE) loan simulator tool. Another calculator, made by the Institute of Student Loan Advisors, helps borrowers find the right repayment program.

The DOE also offers individuals a few ways to suspend repayments temporarily. The duration of the suspensions can extend up to 36 months.

According to Nathan Mueller, founder of BlackBird Finance, you should plan to contact your lender and ask if they can offer payment relief to you – before May 1st – when borrowers will likely begin to overwhelm loan servicer call centers. Procrastination is not your friend.

Consider Refinancing

For those in decent shape to start paying back loans, consolidating your debts can save you money on interest payments. Locking in at a lower rate is a savvy move to free up your finances.

You might be able to save hundreds of dollars per month by consolidating your student debt to a lower rate. But you should act soon before interest rates rise.

“Inflation is much higher than when student loan payments were put on pause, so take stock of your current expenses,” says Maggie Klokkenga, a financial coach and planner with Make A Money Mindshift. “Identify what expenses have to be paid (i.e. rent, utilities, etc.) and the amounts of each, and what expenses you can pare down (take-out, subscriptions, etc.) to allow for your student loan payment to be paid monthly beginning in May.”

Can Your Job Help You Pay Off Student Loans?

Another thing to consider is the emerging trend of employers helping pay student debt. If you have a full-time job, check with your Human Resources department to see if your company can help foot the bill.

An employer can give each employee up to $5,250 per year tax-free toward student loan payments. That’s a huge help if you stick with a firm for a few years. The amount can also go toward tuition reimbursement if you are still enrolled in classes.

Will There Be Student Loan Forgiveness Soon?

One more situation to be mindful of is that the government administration could push for the cancelation of some student debt. If that happens, then having some outstanding debt could make sense.

The disadvantages of that strategy include owing taxes on the amount forgiven and paying more interest while loans are still outstanding. Do not count on all your loans being forgiven.

Conclusion

You might feel anxiety about having to repay your student loans. It can be a significant financial burden for young people already facing many challenges in today’s economy. You can take a step-by-step approach to ensure you are in an excellent position to meet your financial obligations come May 1st, 2022.

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This article was produced by Wealthtender and syndicated by Wealth of Geeks.

Featured Image Credit: Pexels.