Federal Student Loan Repayment: How You Can Be Prepared
When the Coronavirus pandemic struck the United States in March of 2020, the federal government placed a pause on all federal student loan payments and did not incur any interest to provide relief for borrowers who were experiencing job loss. Now that this payment and interest pause is coming to an end in October 2023, it’s time for borrowers to adjust to making payments again. For people who graduated during this pause, they may be making payments on their federal student loans for the first time. If your income and expenses have changed over the past three years, learning to accommodate your federal student loan payment can be difficult. Use these tips on how you can be prepared to restart your federal student loan repayment.
Find Your Servicer
Although your loans are through Federal Student Aid, your loans will be given out to a loan servicer for you to pay directly. Over the time of the payment pause, your loan servicer may have changed. To find out who your loan servicer is, you can log into your account on the Federal Student Aid website and go to “My Loan Servicers”. From there you will log into your loan servicer’s account or create an account.
Know Your Payment
While your payment amount and due date should be the same as it was before the pause, it’s always good to double-check. Before payments start up again, make sure that you have an understanding of how much you are set to owe each month and the due date. You can also take this opportunity to set up automatic payments to ensure that you do not miss a payment.
Analyze Your Repayment Plan
The repayment plan that you chose before the payment pause may not fit your current finances as it did before the pandemic. Take the opportunity to reevaluate your repayment plan and consider changing to a new option.
One of the newest repayment options that has been rolled out is the Saving on a Valuable Education Plan, abbreviated to the SAVE Plan. The SAVE Plan aims to provide the lowest monthly payments across all income-driven repayment plans. Single borrowers who earn less than $32,800 and families of four earning less than $67,500 a year will not owe any loan payments. However, borrowers earning more than that will save a minimum of $1,000 per year using the SAVE Plan than another income-driven repayment plan. Another component of the SAVE Plan is that if you make your monthly payment, your overall loan balance will not grow from unpaid interest.
Check In On Your Budget
After not having to make federal student loan payments for three years, you have changed your monthly budget. According to Nerd Wallet, nearly two in five borrowers say they will need to significantly shift their budget to accommodate their federal student loan payments. Check your monthly income and expenses to see where you can make room for this additional payment. Take a look at all of your subscription services to see if there are any you are not using as much and can cancel. Analyze your spending habits to see if you can cut back on any unnecessary shopping or eating out. Overall, find space within your budget to make your federal student loan payments.
If you need assistance reevaluating your budget to find room for your federal student loan payment, our team at Mooney Lyons is here to help. We can help you analyze your debt and find a path to financial success that works for you. Schedule a consultation with us today to get started.
Sources:
https://studentaid.gov/manage-loans/repayment/prepare-payments-restart
https://studentaid.gov/articles/6-ways-prepare-repayment-begin-again/
https://www.nerdwallet.com/article/loans/student-loans/5-steps-to-prepare-for-student-loan-repayment
https://www.equifax.com/personal/education/loans/student-loan-repayment-options/
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