Student loan repayments resume soon – prepare now

If you’re one of the millions of Americans with outstanding federal student loans, you can expect your payments to resume in May when the pandemic-era hiatus ends.

Here are some tips to help you prepare to repay your student loans.

Know the loans

It’s probably been a while since you even looked at what you owe. What are your balances? What types of loans are in progress? Who takes care of your loans? Do you know the interest rates?

Now is the time to reacquaint yourself with your obligations. This is the first step in forming a repayment plan. For federal student loans, simply go to the Federal Student Aid website to find all relevant information.

If you borrowed money from private lenders, the name of the repairer may have changed due to industry consolidation during the pandemic. Knowing the ins and outs of your loans can reduce this confusion as well as late fees due to confusion about where to send your recovery payments.

Update information

You can also use the StudentAid website to ensure that your contact details, especially your email address, are correct. It was a problem last year. Why was that?

The US Government Accountability Office has emailed millions of borrowers. But the GAO reported that about a quarter of student loan holders don’t have a valid email address. Make sure you’re not one of them now.

It’s easy to register or log in and verify that your personal information is correct.

Determine payments

Once you’ve mastered your loans and verified that your details are correct, determining your next payment amount is crucial. The lender must disclose your monthly payment obligation online. If you don’t see it, call the repairer to confirm.

You can strategize on the best path forward. You might feel intimidated by paying other bills, saving for retirement, and having a little fun with spending on food and entertainment too! Still, sitting down with a financial advisor to optimize your plan might be worth it.

“Even though student loan repayments won’t restart until May, start understanding how this will affect your budget now,” says Stanley Himeno-Okamoto, Certified Financial Planner and Founder of DRS Financial Partners. “If you’re calculating a shortfall, identify areas where you can begin to cut and loosen your new budget over the next two months. It will feel less shocking if you can get used to the reduced level of spending over time. . .”

Repaying loans is easier when you don’t have to think about it. That’s the beauty of automatic payments.

Much like setting up regular retirement contributions, automated approaches to improving your financial situation can reduce time and effort. If you were repaying loans with the auto-debit feature before the forbearance period began, you must re-register to avoid the risk of missing the first due date.

Understanding Options

You can check out other payment plans using the Department of Education’s loan simulation tool. Another calculator, made by the Institute of Student Loan Advisors, helps borrowers find the right repayment plan.

The department also offers individuals a few ways to temporarily suspend refunds. The duration of suspensions can be up to 36 months.

According to Nathan Mueller, founder of BlackBird Finance, you should plan to contact your lender and ask if they can offer you payment relief – before May 1 – when borrowers will likely start to overwhelm service call centers. ready. Procrastination is not your friend.

Consider refinancing

For those who are in good shape to start repaying their loans, consolidating your debt can save you money on interest payments. Locking in at a lower rate is a smart move to free up your finances.

You may be able to save hundreds of dollars a month by consolidating your student debt at a lower rate. But you should act quickly before interest rates rise.

“Inflation is much higher than when student loan repayments were suspended, so take stock of your current spending,” says Maggie Klokkenga, money coach and planner at Make A Money Mindshift. “Identify the expenses you need to pay (i.e. rent, utilities, etc.) and the amounts of each, and the expenses you can reduce (takeout, subscriptions, etc.) to allow for payment your monthly student loan starting in May.”

Another thing to consider is the emerging trend of employers helping pay off student debt. If you have a full-time job, check with your human resources department to see if your company can help foot the bill.

An employer can give each employee up to $5,250 per year tax-free for student loan repayment. It’s a huge help if you stick with a company for a few years. The amount can also be used to reimburse tuition fees if you are still enrolled in classes.

Will there be forgiveness?

Another situation to take into account is that the government administration could push for the cancellation of certain student debts. If that happens, having an unpaid debt might make sense.

Disadvantages of this strategy include having to pay taxes on the amount forgiven and paying more interest while the loans are still outstanding. Don’t count on canceling all your loans.

You may feel anxious about having to repay your student loans. This can be a significant financial burden for young people who already face many challenges in today’s economy. You can take a step-by-step approach to ensure you’re in a great position to meet your financial obligations on May 1.

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