4 things to do before starting student loan payments again

The hour is near. In just under 50 days, tens of millions of federal student loan borrowers are due to resume their payments after a nearly two-year stay. The freeze on federal student loan payments began in March 2020 under the CARES Act and has since been extended five times.

The goal of the forbearance period was to provide federal student loan borrowers with extra room in their budgets to pay for necessities like housing, especially if their jobs or income had been affected by the pandemic. Payments will resume on February 1, 2022.

“After nearly two years of payment freezes, borrowers need to assess their financial situation and consider what has changed since the last time they made payments,” Kevin Walker, CEO of College of Finance Co., recount Fortune. “Getting their finances in order will help them choose the repayment plan that’s best for them. “

A few weeks before the payment deadline, Fortune checked with student loan experts to come up with a list of things to do for borrowers before the forbearance end date. Below are four things you should do before February 1, 2022, to make sure you’re ready to make your student loan payments again.

Borrowers should first contact their federal loan manager to get an update on their accounts and confirm their payment due date, Andrew Pentis, a certified student loan counselor with Student loan hero, recount Fortune.

“If you have any questions about what you are seeing, contact your loan officer directly,” adds Walker. “Do it as soon as possible, as repairers will likely receive a lot of inquiries as the refund approaches.”

It’s also important to verify that your manager has your most up-to-date contact information, as a few federal loan managers have terminated their contracts. This means that some federal loan accounts could have been transferred to a new manager. When you speak with your federal loan officer, you can also explore options for further deferment of payments, he says.

“Borrowers who don’t feel financially ready to resume their payments might consider signing up for an income-based repayment plan, for example, that would cap their monthly contributions at a percentage of their income,” says Pentis. “They could also consider postponements and abstentions that would keep their loans in deferred status, albeit at the expense of the accumulation of interest.”

This year, President Joe Biden announced several rounds of student loan cancellations targeting borrowers with total and permanent disabilities, borrowers who attended institutions now defunct, and government officials.

Tobin Van Ostern, co-founder of Savi, a tech company that finds new repayment and remission options for people with student loans, says to verify this eligibility through the Federal student aid (FSA) website and the website of your service provider.

“This will ensure that you receive all important notifications regarding your invoice due date, your payment amount or whether you are eligible for changes through the extended PSLF. [Public Service Loan Forgiveness] waiver, among others, ”he says Fortune.

You may also be eligible to switch to an Income-Based Repayment Plan (IDR), which sets a borrower’s student loan repayment at an affordable amount based on income and family size. The FSA office offers you four IDR options, which limit monthly contributions to just 10-20% of a borrower’s income. The rates are set to help borrowers repay their loans over a period of 20 to 25 years.

Seeking out an IDR plan “makes a lot of sense for people whose incomes fell during the pandemic to see if the payments would be lower given the new incomes,” Patti Hughes, director of Lake Life Heritage Advisory Group, said previously Fortune.

Amanda Push, an expert on higher education and student debt with Student loan hero, also suggests looking into debt consolidation and student loan refinancing.

Debt consolidation means borrowers can take their individual student loans – say, a few federal student loans and a private student loan – and consolidate them into one loan, as Push says. Some borrowers are currently consolidating their loans to qualify for the public service loan forgiveness program, which only counts federal direct loan payments for forgiveness.

Refinancing is another option for student loan borrowers. This option could help you “get a lower interest rate and change the amount of your monthly payments to be more in line with your budget,” Push explains.

“However, refinancing student loans is not without its pitfalls because you would change your debts from federal loans to private loans, without access to federal support programs,” she warns.

This year, more and more companies have started offering help to their employees with student loan debt, either by offering information sessions on certain loan programs or by offering to help them with student loan debt. pay off the debt of their employees.

“The impact of student debt on your salary could harm your overall financial well-being,” Jeff Cimini, senior vice president of retirement product management at Voya Financial, recount Fortune. “To help offset these costs, a place that people who work may not always look for [to] for support is their employer.

Some companies will offer direct payments for the repayment of student loans, and others will make direct after-tax contributions to help pay off their employees’ debt, he adds, encouraging borrowers to ask their company what the debt is. options available.

“Overall, employer support can help individuals pay off debt faster and, in turn, save them more for short-term needs, like emergency savings,” explains Cimini.

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