The COVID-19 pandemic brought unprecedented challenges to the world, and one area significantly impacted was student loans. With a three-year pause on loan repayments coming to an end, millions of borrowers will soon face a resumption of loan payments, Yahoo reported.
Tips for Student Loan Repayments
Despite the recent Supreme Court decision defeating student loan forgiveness, there are strategies borrowers can employ to stay ahead of the resumption of loan payments starting Oct. 1, 2023, after a three-year pause.
In this article, we will discuss four essential tips to help borrowers navigate the post-pandemic resumption of loan payments landscape successfully.
Verify Your Loan Balances and Payment Amounts
After a prolonged period without making loan payments, it’s crucial to be aware of your current loan balances and the amount you’ll need to repay each month. Visit the federal student aid website to access your loan servicer information and explore repayment options.
For borrowers with private loans, to confirm payment amounts and balances, log into your accounts with each loan servicer. Being well-informed about your financial obligations will prevent any surprises when the resumption of loan payments begins.
Include Your Student Loans In Your Budget
As the resumption of loan payments begins, it’s time to reintegrate your student loan payments into your monthly budget. Allocate the necessary funds by reserving your monthly loan payment in a savings account. By doing this, you can assess the financial impact this change will have on your overall budget.
Aim to save a few months’ worth of payments, which can later be used as a lump-sum payment towards your loans, saving you money on interest. If you encounter difficulties during this trial period, consider taking on additional work, reducing costs in other budget areas, or exploring alternative repayment options.
Enroll in an Income-Driven Repayment Plan
If you struggled to keep up with loan payments before the pandemic, enrolling in an income-driven repayment (IDR) plan can provide relief. The newly introduced Saving on a Valuable Education (SAVE) plan offers some borrowers the possibility of a monthly payment as low as $0, while others may see their payments cut in half.
This plan will be available for enrollment later in the summer. Traditional IDR plans allow you to reformat federal loans, extending the repayment term up to 25 years and reducing your monthly payment to a percentage of your discretionary income. While you will pay more in interest over time, this program aims to prevent default and delinquency by making payments more manageable.
Refinance Private Student Loans
If you have private loans and are struggling with payments, consider refinancing your loans with a different lender to reduce your monthly obligations. Another option is consolidating multiple private loans into one, resulting in a lower monthly payment.
Ensure you compare offers from various private lenders to secure the best rates and terms. However, keep in mind that refinancing federal loans into private loans is not recommended, as it would entail forfeiting the protections associated with federal loans.
As the world gradually emerges from the COVID-19 pandemic, student loan borrowers must prepare for the resumption of loan payments. While the recent Supreme Court decision has dashed hopes of widespread loan forgiveness, borrowers can proactively manage their repayments using the strategies discussed above.