What to do now that student loans have resumed?
Are you ready to start paying back your student loans?
If you're one of the millions of Americans with federal student loans, you may have breathed a sigh of relief during the temporary pause on student loan payments and interest due to the COVID-19 pandemic. However, the federal student loan pause has ended. Interest has started accruing as of September 1, and payments will resume in October. In this blog post, we'll guide you through what to do now that US federal student loans have resumed, helping you navigate the process and make informed decisions.
1. Find out who your loan servicer is
First things first, you need to know who your loan servicer is. Due to changes in the student loan servicing industry, your loan servicer may have changed since you last checked. Your loan servicer is the company responsible for managing your loan account and collecting payments. To find out who your current loan servicer is, visit the Federal Student Aid website and log in using your FSA ID. Once you're logged in, you can access your loan details, including your loan servicer's contact information.
2. Know your finances inside and out
Before diving into repayment options, it's essential to have a clear understanding of your financial situation. Calculate your monthly income, including any recent changes in your salary or employment status. Then, list all your monthly expenses, such as rent or mortgage, utilities, groceries and other bills. Finally, take stock of your debts, including student loans, credit card balances and other outstanding obligations. This comprehensive overview of your finances will help you make informed decisions about your student loan repayment.
For more information on how to calculate your earnings, track your spending, build a budget and understand debts, read our "5 Principles of Financial Literacy" blogs:
- Principle 1: Earning
- Principle 2: Saving and investing
- Principle 3: Protecting
- Principle 4: Spending
- Principle 5: Borrowing
3. Decide on your repayment plan
Federal student loans offer a variety of repayment plans to suit different financial situations. These include Standard Repayment, Income-Driven Repayment (IDR) plans like Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) as well as Graduated Repayment and Extended Repayment plans.
Research each plan to determine which one aligns best with your financial goals and current circumstances. Remember that your choice of repayment plan can impact your monthly payment amount and the total interest you'll pay over the life of the loan.
Once you've decided on a plan, use the Federal Student Aid website or contact your loan servicer to find out your monthly payment amount. Consider auto-pay for your monthly dues, as this will decrease the chance that you miss a payment and hurt your credit score, and many lenders offer a discounted interest rate if auto pay is set up.
4. Reach out for help if you're facing financial hardship
If resuming student loan payments puts you in a financial bind, don't panic - your loan servicer should have solutions for you. You can request deferment or forbearance, which temporarily suspends or reduces your monthly payments. Additionally, Income-Driven Repayment (IDR) plans can help lower your monthly payments based on your income and family size. Contact your loan servicer to discuss these options and determine if you qualify.
5. Prioritize your debts
If you have multiple debts, it's crucial to prioritize them wisely. While student loans are important, high-interest debts like credit card balances can quickly spiral out of control if left unchecked. Create a debt repayment strategy that allocates extra funds toward high-interest debts while making the minimum payments on others. This approach can help you save money on interest in the long run.
6. Consider refinancing your student loans
Refinancing your student loans is an option worth exploring if you want to potentially lower your interest rate and simplify your repayment. However, it's important to note that when refinancing federal loans you'll lose access to federal protections like income-driven repayment plans and loan forgiveness programs.
If you are interested in refinancing, you can apply or check your rate with Southland Student Choice.
You're ready to start paying down your debt!
By following these steps and staying informed about your options, you can manage your student loan repayment effectively and make progress toward becoming debt-free.