When Do Student Loans Restart and How You Should Prepare?
Due to the debt ceiling bill passed by Congress and signed by President Biden, the student loans payment pause will end on August 29, 2023. This means that you will need to get organized and prepare for making student loan payments again.
(This article was updated 6/5/23 from a previous version.)
Now is the time to update your information, take stock of your situation, and figure out how your student loan payment will fit into your budget.
If you’ve been ignoring your student loans since the beginning of the pandemic, here are the exact steps you should take now to get ready:
How to Prepare for the End of the Student Loans Payment Pause
Note: this information applies to federal student loans (identified by names like Direct, Stafford, PLUS, Perkins, and FFEL loans). If you have private student loans, consult with your lender.
1. Log in to your account at studentaid.gov to get a complete list of your federal student loans and loan servicers.
Since federal student loan payments were paused in 2020, changes have been made to federal student loan servicers. Loan servicers are companies or organizations that the federal government pays to manage the student loans on behalf of the government.
Several student loan servicers ended their contracts with the federal government, which means that the account you used to log into to make payments may no longer be the same.
To get a complete, updated list of your loans and loan servicer(s), log in to your Federal Student Aid account with your FSA ID.
2. Log in to your account at your student loan servicer and verify all information.
Whether you have a new student loan servicer or forgot your old login information, figure out how to log in and then review everything. Many people moved, changed jobs, got new bank accounts, or made other changes that need to be updated.
If you have a new loan servicer, you’ll also want to make sure that your payment history looks correct and all information was transferred correctly.
*Beware of scams. Some scammers are taking advantage of the confusion around the student loans payment pause ending and are trying to trick you into giving you their personal information. Always verify your true list of loan servicers with studentaid.gov before giving out personal information.
3. Set up autopay.
Your student loan servicer will be contacting you with information on when you will start your payments. You may need to fill out a form for income verification or complete other steps. Watch for more information.
Once that happens, you can connect your bank account and set up autopay so you don’t forget to make the payments.
4. Evaluate your budget and figure out how you’ll pay your student loans.
When student loan payments were put on pause in 2020, many of us used the money we had been paying for student loans in other ways. Some used it to increase their savings, but if you’re like most people, you probably have no idea where that money went.
Unfortunately, you’re going to have to find the money for your student loan payment if you want to avoid bad things happening.
Maybe you already know that you have enough excess income to cover the student loan payment. If you don’t, then it’s time to look at your budget.
Start by figuring out exactly where your money has been going and then evaluate your expenses to see what you can reduce or cut.
Here are some things you can do to reduce expenses:
5. Look for ways to lower your payment
If you’re looking at your student loan payment and thinking there’s no way you’re going to be able to afford that in addition to higher food and gas prices, you’re not alone and you might be able to get help.
Here are some ways you may be able to get relief:
1. Income Driven Repayment Plans
Depending on your income, you may be eligible for a lower student loan payment. To find out what options you have, log into your Federal Student Aid account and use the Loan Simulator tool and then enroll through your student loan servicer.
2. Student Loan Forgiveness Programs
Certain borrowers may be eligible for full or partial loan forgiveness or cancellation. For example, those working for the government or a non-profit and make qualifying payments might be eligible for the Public Service Loan Forgiveness (PSLF) program. For a complete list and more information, visit studentaid.gov.
Keep in mind that those who were previously ineligible due to having the wrong type of loans may now qualify under the PSLF Temporary Waiver.
3. Refinancing Student Loans
Refinancing involves converting your federal student loans into private student loans. This can be an effective way to lower your interest rate. However, you should always be cautious when refinancing because you lose certain benefits and protections that are only given to federal student loans. For example, you lose access to income driven repayment and loan forgiveness programs.
However, if you are certain that you do not qualify or will not need these benefits, refinancing can be a good move. You can use a student loan refinancing calculator, such as this one from NerdWallet, to evaluate your options.
Still Struggling?
If you’re really struggling even after the above measures, call your student loan servicer and talk to them about your options. By far the worst thing you can do is just not make payments and pretend it’s not happening, as it will adversely affect your credit score and the interest will just keep accruing. Your loan servicer may be able to help you avoid the bad ramifications of loan default.
Don’t wait until the student loans payment pause officially ends in August. The earlier you get started, the more time you’ll have to come up with the best plan for you. And don’t forget that you can always get help from a financial professional.