It might only be a few more months until borrowers have to make a student loan payment.
The U.S. Department of Education has prepared borrowers to be ready for the bills to resume 60 days after the Supreme Court issues its ruling on the Biden administration’s comprehensive student loan forgiveness proposal or by the end of August at the latest.
According to higher education expert Mark Kantrowitz, repayment starting in September is the most likely scenario.
The Biden administration has repeatedly extended the payment moratorium on federal student loans during the pandemic era. Still, experts say a further extension is unlikely now that the public health and national emergency have passed.
Changing your budget to fit another student loan payment could be difficult. The typical monthly bill is around $400. Thankfully, there are actions you may take to improve your preparedness.
These are the first three.
1. Contact your service provider
Many borrowers must get used to a new servicer when payments restart. Several of the biggest corporations that service federal student loans stated they would stop doing so during the Covid-19 crisis.
The Pennsylvania Higher Education Assistance Agency (commonly known as FedLoan), Granite State, and Navient, three organizations that administered federal student loans, announced they would terminate their government contracts.
As a result, Kantrowitz estimates that by the time payments begin or shortly after, nearly 16 million borrowers will have to deal with a different firm. According to experts, ensure your servicer has your most up-to-date contact information so you get all the notices about the impending change.
Multiple notices should be sent to impacted borrowers, according to Buchanan. He noted that if you accidentally submit a payment to your old servicer, they should transmit it to your new servicer.
2. Choose a reasonable repayment method
The Covid-19 epidemic has significantly altered the lives of many people. If your situation has changed since three years ago, check over your options for payment plans and choose the one that best suits your current needs.
The law has also altered in that period. Because of a clause in the $1.9 trillion federal coronavirus stimulus plan President Joe Biden signed into law in March 2021, student loan forgiveness is tax-free until at least 2025. That rule will stick around forever.
Income-driven repayment plans may become more enticing because they frequently have smaller monthly payments, and borrowers will likely avoid being confronted with a sizable tax burden at the end of their 20 or 25 years of payments.
A new income-driven repayment plan that would cut certain borrowers’ payments in half is also being developed by the Biden administration and is in the process of being implemented.
But if you can, the typical repayment period is only ten years.
Use one of the calculators at Studentaid.gov or Freestudentloanadvice.org to figure out how much your monthly bill would be under various programs, advised Betsy Mayotte, head of the charity The Institute of Student Loan Advisors.
If you decide to alter your repayment arrangement, Mayotte advises doing so with your servicer before the next round of payments begins.
3. If you can’t make payments, have a plan.
When payments start again, you’ll have choices if you’re unemployed or experiencing another financial crisis. According to experts, you should first submit a request for a hardship or unemployment postponement.
As long as they are subsidized undergraduate student loans, those are the best options to delay your federal student loan payments because interest often does not accrue under them.
But keep in mind that when you resume paying, your debt will be higher — often considerably higher — and interest will have accumulated.