Get Ready to Start Paying Off Student Loans Again
President Biden’s massive plan to write off student loan debt for millions of Americans is currently before the Supreme Court . Student loan payments are expected to resume either 60 days after the Supreme Court ruling or 60 days after June 30, whichever comes first. This means that whatever the decision, debt repayment is likely to begin this summer.
Given the rising cost of living , labor market uncertainty and general recession rumors , borrowers need to prepare as carefully as possible before loan repayments resume. Here are some of the steps you can take now to be ready when loan repayments begin later this year.
How to prepare for loan repayment
Don’t let student loan returns catch you off guard. There isn’t much time left between today this summer, so it’s important to start taking steps now to get your repayment plan in order .
Find out exactly how much you have to pay
Loan forgiveness or not, you need to figure out what your student loan payment will be after the freeze . For loan amounts and providers, go to studentaid.gov . (Note: This is not the same portal you would normally use to pay your student loan, such as through a service agent like Sally Mae.) Once logged in, select “My Help” from the drop-down menu under your name. Your credit service organizations should appear in this section. By clicking on Loan Breakdown, you will see a list of loans you have received, including loans that you have paid off or combined into a new loan.
Once you have verified your loan company, visit that service provider’s website and log into your account to make sure all your contact information is up to date so that you don’t miss any notification from them during this process.
To recap, it is your current credit provider, not the government, who will inform you of any outstanding balance and revised monthly payments (and these payments will not resume until January).
Include the loan payment in your budget right now
Once you know how much you will have to pay each month, start planning for it as soon as possible. Take advantage of the time you have to prepare and make it easy for yourself to pay the full amount of your monthly payment.
This reduction may look like you’re saving 25% on your loan payment the first month, then 50% the next, and so on. Whatever amount you have set aside, consider putting it in a specific high-yielding savings account so that it earns a small percentage until it needs to be used. A reduction strategy allows you to draw from those few months of savings rather than abruptly from your income when payments resume.
Consider paying off your loan now
If you have the funds, try using your current credit break. This pause includes an interest rate of 0%, which means that 100% of the payments made during the pause go towards your principal (i.e. the loan amount). By reducing your loan amount now, you can reduce your overall loan duration after repayments resume.
Check out other loan forgiveness programs
Whatever the outcome of Biden’s forgiveness plan, you never know what else you can lay claim to. The FSA has a guide to help you check your eligibility for other public loan forgiveness programs. If you find an option that suits you, take the time now to make sure you’re registered correctly.
Student loans are suffocating millions of Americans, but you have a few months to be in the best position to solve your problems. And if you’re (understandably!) tempted to just say “fuck it all,” here’s what happens if you don’t pay off your student loans at all .