3 Essential Steps to Stop Worrying About Student Loan Payments: The halt in student loan payments will end soon. It is advisable to update your budget now in preparation for the resumption of these instalments. If you anticipate having difficulty making your payments, investigate the available payment options.
This year, the end of summer will not only signal the start of the academic year. It will also be time to resume making payments on student loans.
As federal pandemic relief comes to a close, student loan borrowers will resume making payments on their loans. Since March 2020, borrowers have not been required to make payments, and for some, this has been a lengthy reprieve.
Due to the extended period without student loan payments, borrowers may need to prepare for the resumption of these payments and the potential impact on their financial situation. The accrual of interest on loans will begin on September 1, 2023, and payments will recommence on October 1, 2023. Your loan’s actual due date will be determined by your loan servicer.
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3 Essential Steps to Stop Worrying About Student Loan Payments
Borrowers should begin preparing for these payments immediately. Do not delay until the last minute to budget for this expense. Here are some actions you can take immediately to prepare for when these payments are due.
1. Determine which payment plan is optimal
The moratorium on student loan repayment has been in effect for three years. You may need to evaluate your repayment options and select the plan that best fits your current financial situation. Initial enrollment in the standard repayment plan is automatic for all borrowers. This plan stipulates a monthly fixed payment for up to ten years. But what if you cannot afford that payment amount?
2. Plan to pay at least something: 3 Essential Steps to Stop Worrying About Student Loan Payments
Small, affordable instalments are preferable to none at all. A plan of IDR, or income-driven repayment, assures that borrowers can continue making payments and reduces the likelihood of default. IDR plans reduce your payment amount based on your ability to pay, even if that amount is $0.
Only federal student loan borrowers can apply for income-based repayment arrangements. If you have private student loans and are having trouble making payments, you should still contact your servicer to find out what payment plan options they offer to borrowers who are having financial difficulties.
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3. Include payments for student loans in your budget
Prepare your budget now, before the payments begin. Regardless of the size of your payment, it will eat into your disposable income, so do the maths in advance. Examine your expenditures to determine where you can reduce — or even eliminate — costs so that the payment amount does not completely derail your budget. Until you adjust to this new expense, you may need to temporarily reduce your expenditures. Utilise a budgeting app to keep track of your expenditures and determine where your money is going.
Repaying student loans is a significant financial obligation, and failing to make payments on time or defaulting on your loans can have severe negative repercussions, such as poor credit, garnishment of tax refunds, and inability to obtain an FHA mortgage loan to purchase a home.
Increasing your income, employer-based student loan repayment assistance, and even Public Service Loan Forgiveness (PSLF), if eligible, are additional methods to make your payments if you are concerned about the end of the student loan repayment deferment.
Even though the payment pause is coming to an end, there are still actions you can take immediately to update your budget, make your payments, and maintain financial control.
