If you have a federal student loan, you may have been used to not paying payments for over two years. However, the pandemic relief program that halted payments and interest on federal student loans is set to expire in less than 90 days. Beginning in February, you’ll be responsible for charges once again.
And that’s official: although the forbearance period has been extended four times before, the Education Department says it won’t happen again. In other words, regardless of what happens with the epidemic or the economy, you will need to begin repaying your debts.
You’re not alone if this makes you nervous. 63% of people with outstanding student loan debt are anxious about their capacity to make payments after federal student loan forbearance expires. Up to 9 out of 10 debtors are not ready to begin payments.
But there’s a lot you can do right now to assist you in getting back into paying off your debt, including decreasing your monthly payments in the future. You may get consolidate your loans or when you need to get a new loan instantly from Payday Champion.
Know how much you owe on your student loans.
To find out how much you owe, go to the website of your student loan servicer. If you don’t know who handles your student loan billing (also known as your servicer), you may find out by going to StudentAid.gov and looking up your amount. Check your email or physical mail for details on how to set up an account if you just graduated and are commencing repayment.
However, be aware. Within the following year, your student loan servicer may change. Several servicers are abandoning the industry. Navient has said it would transfer all of its accounts to other firms by year-end.
Stacey MacPhetres, senior director of education finance, advises, “Read every piece of mail and every email that you receive.” “I believe we are all guilty of thinking to ourselves, ‘Oh, that’s a solicitation, or I don’t need it.’ But a lot of things are changing.”
The good news is that a lot of things will remain the same. If you did not make any payments on your federal student loans during the forbearance period, your amount should be the same as when the Trump Administration implemented the payment halt in March 2020.
The conditions of your loan, interest rates, and any current perks will still stay the same. Your online login credentials should not change, nor should the number you contact to ask questions about your loans.
If you’re on a conventional repayment plan, your payment in February should be the same as it was the month before the forbearance program began. Your monthly bill amount will not be visible until January if you’re a new borrower just beginning your repayment.
Finally, if you’re on an income-driven repayment (IDR) plan, your servicer will let you know how much you owe before your next payment is due more on that later.
Make changes to your personal information.
Make sure all of your contact information is up to current, regardless of whether your student loan servicer is changing. Here’s a list of things to remember.
- Contact information through email
- Address for physical mail
- Number to call
- Information about your bank account (It’s been a while; maybe you no longer use the version that’s connected to your debts.)
You weren’t obliged to submit your yearly papers to recertify your income and family size if you were on an income-driven plan during the forbearance. Instead, your loan servicer will send you an email with a new deadline for updating your income. Another incentive to keep your contact information up to date is this: You risk having your payments raised abruptly if you miss this date.
If your income has decreased or your family has increased, you may recertify before your forbearance period expires so that your new payment is based on your current financial position. It takes roughly 10 minutes to recertify. According to the Consumer Financial Protection Bureau, processing the application might take at least two weeks (CFPB).
Also, if you used auto-debit to have your payments automatically deducted from your bank account each month, be aware that it will not renew once repayment begins. At least 30 days before your first post-forbearance payment, you must opt back in.
Rework your budget to include student loan payments.
Many borrowers who defaulted on their student loans at this time have utilized the money they would have spent on them to pay for things like rent and credit card debt. As a result, one of the most challenging tasks is maybe restructuring your budget to include student debt once again.
To begin, set aside at least the amount of your February student loan payment in a savings account to ensure you have enough money to handle the first month of gains. If you can’t do it right now, put aside some money for it over the following three months. So, if you’re going to owe $300, put $100 in savings each month from now until the end of January.
If you’re having trouble paying payments, you’ll need to take a closer look at your budget. Make a list of what you’ll need, such as accommodation, food, and transportation. Then, cut out whatever you don’t need. No offense, but two outings to the gym a month may not be worth $100. Plus, a quick Google or YouTube search will turn up a slew of home fitness regimens that don’t need any equipment – or a monthly subscription. Do you utilize all of the streaming services you pay for regularly? Perhaps you should stick to the one you use the most. You may also divide the charges with a friend or relative. Overall, whatever money you save may be used to pay down your student debts.
Existing bills should be renegotiated.
Suppose student loan payments are still causing you problems after you’ve reworked your budget. In that case, you may be able to save money by renegotiating items like phone bills, internet services, and insurance.
Start by looking at other possibilities. Then phone your service provider and inform them that you will be switching to a carrier that provides better deals. They may be willing to match or decrease the rates of their rivals. Companies like Billcutterz contact your service providers and negotiate your bills for you if you don’t want to handle them alone. However, you must share any savings you get with the firm in exchange for performing the legwork for you.
Reduce your monthly cost by switching to an income-driven repayment plan.
If you’re having financial difficulties, an income-driven repayment (IDR) plan may be able to help you decrease your monthly payment. These plans calculate your monthly fees depending on your income and family size, and if your income is low enough, they may even cut your costs to zero dollars. Plus, depending on the sort of IDR plan you’re enrolled in and the amount of debt you have, whatever remains of your federal student loans will be forgiven after 20 to 25 years of payments.
In around 10 minutes, you may apply for an income-driven plan on your servicer’s website, and processing should take no more than two weeks.
However, there are certain disadvantages to income-driven schemes. One significant burden of these programs is that interest continues to accumulate on your loans, and most borrowers’ income-based payments are insufficient to meet the claim, causing their debt to rise.
“If you’re going to use an income-driven plan, don’t think of it as a long-term repayment plan,” advises MacPhetres.
She adds that your payments may be tiny, or even nothing, which may seem impressive at the time. “But keep in mind that you’re paying interest on it. And you’re essentially doubling your loan debt every year.”
If your monthly payment on an income-driven plan is $0, you can make any amount paid. This will help you pay off your mounting debt. According to MacPhetres, you should contact your loan servicer and request that the principal apply the fee. This will guarantee your payments will not pay off the interest.
Income-driven programs aren’t meant to be long-term investments. For some borrowers, exiting the income-driven plan as soon as possible would allow them to pay off their debt quicker and pay less interest overall. Others, especially those who work in low-paying sectors and have significant debt loads, may be better off continuing in the income-driven schemes long enough to qualify for loan forgiveness later on. This student loan simulator can help you figure out how much you’d pay under various programs, as well as if you’d see any debt erased under specific options.
Request assistance from your boss.
According to research published in 2021 by the Employee Benefit Research Institute, 17% of companies provide student debt repayment aid, with another 31% planning to do so.
Gift of College chief operating officer Patricia Roberts says, “A rising number of businesses are realizing the need to give student debt help as a financial wellness benefit to distinguish themselves in a competitive market and to attract and retain top talent.”
Gift of College provides tools to assist people and businesses in making contributions to college savings accounts or student loan balances.
So, if you’re seeking employment, don’t be scared to inquire about these advantages from potential employers. You may use this tool to look for jobs at firms that provide student debt payback to their workers. These plans vary by company, but most operate based on a match, with your employer only paying if you do.
Student loan aid was formerly treated as taxable income for both the employer and the employee (for payroll taxes) (for income taxes). However, that is no longer the case under interim restrictions, making the perk a better bargain for companies. If your employer does not provide it, submit a proposal to your human resources department.
“I believe workers should feel free to inquire about this sort of perk and alert their company,” adds the author. “According to Roberts. “It’s possible that the employer is unaware of the modifications that went into effect at the end of 2020.”
Consider if refinancing is a good option for you.
If you have them, it may be possible to refinance your private student loans. The finest student loan refinancing firms can help you decrease your interest rate and, as a result, your monthly payments. Making minimum payments on your federal loans could be freed up by doing so with your private loans.
However, even if refinancing lowers your monthly payment, it may not be the best option if you have federal student loans. Because federal loans have lower interest rates than private loans, the savings from refinancing are likely to be less.
More crucially, refinancing your government loans via a private entity means you are no longer a part of the federal system. That means you’ll lose access to all of its perks, including income-driven plans, forbearance programs, and any future help.
“You would not profit if we ever went back into another CARES Act-like circumstance,” MacPhetres said.
Furthermore, to qualify for the prices advertised on TV and online, you must have a perfect credit score. This is unlikely to happen if you’re already in debt from school loans. Instead, look into choices, such as a repayment plan based on your salary.