How to Pay Back Student Loans Once Payments Resume
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- Student loan payments are slated to resume on August 31.
- Students should start making a plan to begin paying their loans back.
- There are options available for students who can't afford their payments.
- Paying loans back before the moratorium ends could save you in interest.
For over two years, student loan borrowers have tasted what life is like without monthly payments looming over them.
But on August 31, that's set to change. President Joe Biden announced that he'll lift the moratorium on student loan payments for the first time since March 2020.
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Ready to Start Your Journey?
The White House has suggested that another extension may be coming. Regardless of whether they extend the moratorium again, borrowers should start preparing sooner rather than later for the possibility of student loan payments resuming.
From budgeting to income-driven repayment plans, learn how you can financially prepare for monthly payments and interest to come back.
3 Steps to Pay Back Student Loans After the Moratorium
With extension after extension, it's hard to say when exactly student loan payments will start back up again. You should still have a plan in place for whenever the moratorium ends.
Step 1: Create a Budget
Budgeting is free, simple, and effective. If you didn't budget in college, it's important to start getting into that habit as soon as possible. Budgeting can help you come up with more money to pay back your student loans without increasing your income.
One popular budgeting method is the 50/30/20 rule. Fifty percent goes toward your needs, 30% goes toward wants, and 20% goes toward savings.
According to this budgeting strategy, student loan payments fall under savings. Therefore, one approach is to reallocate some of your other savings toward student loan payments. If you're not currently saving, it's essential to break out your budget in terms of needs and wants and cut from the wants.
This is far from the only budgeting method — but it's an easy one for budding budgeters to follow and a great way to evaluate your current spending.
Step 2: Find Out How to Pay
If you haven't paid student loans in over two years, you might have forgotten where to even go to pay them again. A good starting point is to contact your school's financial aid office.
Your school can provide you with details like how much you originally borrowed and the names of your student loan providers. Once you have the names of your student loan providers, you can go to their website, where there's usually a portal for you to make payments.
You can also see the specifics of your loan — like your balance, interest rate, and more — on your provider's website.
Step 3: Make Your Monthly Payments
The easiest way to make sure you never miss a payment is to set up automatic payments. You can do this on your student loan provider's website. Making your payments on time and in full will keep you on track to pay off your student loans faster.
Keep in mind that you don't have to pay the exact amount due. You can pay more if you'd like — which can help you get out of debt faster and save money on the amount of interest you pay.
What to Do if You Can't Afford Student Loan Payments
You're not alone if the moratorium doesn't change the fact that you can't afford to pay off your student loans. But you don't have to resort to simply not paying them off. Here are some options you can try to manage your student loans.
Notify Your Lender
Your lenders want to help you pay off your loan. If you contact them, they'll likely walk you through your options. Those may include repayment plans, consolidation, forgiveness, or other possibilities. Just talking to your lender can result in you making a plan to pay off your student loans faster — but many borrowers don't even consider it.
Change Your Student Loan Payment Due Date
After the moratorium ends, you'll have to go back to paying your student loans every month. You can't change them being due every month, but you can change the day you have to pay them. All you have to do is contact your loan provider and see if they'll move it for you. You could move it to a more beneficial time — like after your paycheck hits.
Apply for Income-Driven Student Loan Repayment
Income-driven repayment plans can help reduce your monthly payments to better accommodate your financial situation. You may qualify to pay just 10 to 20% of your discretionary income or the money you have left after your necessities (after taxes).
You can apply for an income-driven repayment plan at this Department of Education site, but they recommend that you talk to your loan provider first to see if you qualify.
If You're Unemployed, Try Deferring Your Student Loans
Deferment can pause your student loan payments for up to three years. Your loans might still accrue interest during that time. This may be a valid option if you're unemployed and other income-driven repayment plans won't work for you.
Unemployment is only one reason you may qualify for deferment. Other qualifiers include undergoing cancer treatment, facing economic hardship, or serving in the military. To apply, you have to file a specific request on the Department of Education's website.
Consider Forbearance as a Last-Ditch Effort
Forbearance is what's happening to student loans right now. Payments are temporarily paused for borrowers. Normally, forbearance lasts three to six months and is something you have to apply for using the General Forbearance Request form. You could apply for forbearance if you were facing financial difficulty, medical expenses, or any other reason. Forbearance is generally easier to acquire than deferment.
Forbearance is beneficial for borrowers right now because interest isn't accruing, and the forbearance period does not count toward a borrower's usual three-year forbearance cap. But after the moratorium ends, forbearance won't be as convenient. Interest may accrue, and it'll take longer to pay off your student loans.
See Whether You Qualify for Forgiveness
The largest student loan forgiveness program is Public Service Loan Forgiveness (PSLF). However, it's notorious for being difficult to qualify for. You need to be in a public service occupation like law enforcement, public education, public health, or the military. You also need to have received Federal Direct Loans.
If you don't qualify for PSLF, you may qualify for other student loan forgiveness programs, including those for volunteers and Total and Permanent Disability Discharge for veterans.
Frequently Asked Questions About Student Loan Repayment After the Moratorium
Will my loans and payments be the same amount as before the moratorium?
Technically, yes. You'll owe the same amount as soon as the moratorium ends. But the day after, you'll owe slightly more because student loan interest is applied daily. The only way you'll owe the exact amount you did as before the moratorium is to pay your loans off any time up to the first day it ends.
Will the moratorium run longer than August 31?
Probably, but nothing is set in stone yet. The latest extension for the moratorium lasts until August 31, but the White House has suggested they're open to extending it again. White House Press Secretary Jen Psaki said that they will "continue to assess" the student loan moratorium as August comes closer.
Experts say that the Biden administration will likely extend the moratorium again so that voters aren't forced to pay back student loans before the midterm elections in November.
Will my student loans be forgiven after the moratorium?
Not automatically. You can enroll in Public Service Loan Forgiveness (PSLF), but your loans won't be forgiven for 10 years -- and it's only available for people working in specific occupations.
One of President Biden's campaign promises was to forgive $10,000 of student loans for all borrowers. White House Press Secretary Jen Psaki said recently that the White House "has not ruled out" that forgiveness. However, it's not clear whether that's happening in the near future. You should assume that your student loans won't be forgiven so you can be financially prepared after the moratorium.
Should I make student loan payments during the moratorium?
Whether you should pay your loans during the moratorium depends on your specific financial situation. You'll likely save money by paying off loans during the moratorium. Cutting down your student loan balance while there's no interest will help you lower the amount of interest you'll have to pay once the moratorium ends.
However, if the government does forgive your student loans, they haven't indicated that you'll be reimbursed for what you paid off.
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