They come back for your student loan payments

Many of us have felt financial pressure during the pandemic. If you’re one of the more than 40 million people who pay off federal student loans, the CARES (Coronavirus Aid, Relief, and Economic Security) law may have at least given you a chance to breathe by suspending your payments from March 27 to March 30. September. , 2020. This end date has been pushed back several times since then. But last August, the Ministry of Education announced a “permanent extension” of this break until January 31, 2022.

In short, unless you choose to suspend your payments, you will have to start making them again, almost two years later. Much may have changed during this significant amount of time. Perhaps you experienced a drop in income or used funds that would normally have been spent on your student loans to cover other costs. Whatever your situation, you will need to plan for this upcoming financial obligation. We spoke with experts about what you can do over the next few months to prepare for it.

Make sure your information is up to date

Checking the contact information your loan officer has on file for accuracy will ensure you see emails and other alerts letting you know that payments are due, says Nika Booth, Money Coach and Founder of personal finance content that tells about his journey. to debt freedom on Instagram. Federal Student Aid (FSA) explains how to identify your server on its website. Keep in mind that your repairman may have changed amid the recent upheavals in service contracts with the Department of Education.

You also want to make sure that your bank account information is up to date, especially if you are no longer funding the account you used to make the student loan payments prior to the purchase. “The last thing we want is for student loan payments to resume, for the automatic payment information to be completely wrong, and then we end up with insufficient funds or overdraft fees, and that creates another economic hardship. “says Booth.

Understanding your repayment plan

“You want to make sure you know your deal and understand what your payment will be,” especially if you’ve recently graduated and haven’t started making payments yet, says Rita-Soledad Fernández Paulino, Financial Educator and coach who aims to teach BIPOC, women and LGBTQ people how to build wealth.

In the standard repayment plan, you pay the same amount each month to pay off your loan in full after 10 years. “However, this may be something that is currently out of your budget, and I think it’s something people need to consider,” Paulino said. If you’re having trouble figuring out your plan, she says you can send her a DM on IG.

Create a repayment strategy, if you haven’t already

“The best way to tackle any debt or any obstacle is to face it head-on,” says Booth. “Look at the details of your loan. Your loan details, which you can get from your service agent, provide a breakdown of all your loans, she explains, including when they were disbursed. Find out what your unpaid interest is and how much of your minimum payment is spent on it. Remember, you must pay any unpaid interest before your payments are applied to your principal. Even if you pay, say, $ 50 more and more of your monthly payment, it might just be unpaid interest, not principal.

If that sounds messed up, that’s because it is. “This exceptional interest is the reason why it is difficult for people to repay their student loans,” says Booth. She suggests eliminating unpaid interest on one of your loans while making minimum payments on the others. This way, “you will see real progress in repayment instead of dividing that extra money between several debts at the same time”.

Paulina recommends setting a debt repayment date. “Plan backwards,” she says. “Say I want to be debt free for so many years. What will it take to do that? ” You can use FSA’s loan calculator to help you determine the best repayment strategy for your goals and needs, says Booth. Logging into your FSA account links the simulator with your federal student loan information.

Evaluate your budget

It’s been almost two years since your last student loan payment, and you may have gotten used to using that money for other things. In other words: “The lifestyle drift is real,” Booth says. To determine if you need to update your budget, she suggests comparing your bank and credit card statements before and after you suspend your student loan payments. Write down what you are spending more on now than you did then and adjust accordingly.

At the same time, don’t deprive yourself, says Paulino. Depending on where you live in the United States, you might understandably want to visit the restaurants and bars that have finally reopened. “You’re going to set yourself up for failure if you think, ‘Oh, I shouldn’t be doing this,'” she said. “Whatever you choose to do, be intentional about it.” If dining out will make your wealth building trip sustainable, be sure to budget for it. “Anything that looks like deprivation is not sustainable. “

Start making payments now, if you can

If you’ve suspended your student loan payments and can afford to start making them again, you might as well start so you can take advantage of the temporary 0% interest rate, Booth says. Normally, interest on student loans accrues everyday, added to your balance. But because no interest was accrued during the pandemic break, people who continued to make payments found it easier to repay their unpaid interest, which did not increase. Of course, you might not have the year or both as some people have paid this fixed unpaid interest, but a few months are better than none.

Call your loan manager as soon as possible if you are unable to pay your payments

“Be proactive,” Booth says. As stressed as you may be, know that you to do have options. If you don’t earn enough to pay your monthly minimum, you can apply for an income-based repayment plan, she points out. You can also ask for an economic hardship postponement, general abstention or a postponement of unemployment if you have lost your job. Your manager will work with you to determine the ideal repayment plan for your situation. Booth adds that FSA also has a reimbursement calculator that suggests various relief options.

Review Public Service Loan Remission (PSLF)

The PSLF is a program that pays off the remaining balance of your federal direct loans after making 120 qualifying payments – that is, monthly payments over 10 years – and meets a few other requirements while working full-time in the business. civil service, explains Booth. in its free PSLF Quick Reference Guide. However, the program has had a bad reputation, in part because of its dismal 98% refusal rate.

Fortunately, the Ministry of Education is considering an overhaul of the PSLF. In the meantime, until October 31, 2022, it will offer temporary retroactive credit for payments, even if they did not previously meet the requirements, under the expanded temporary PSLF. As a result, about 550,000 borrowers could have their loans either completely canceled or closer to the 120 loan payments needed to qualify for cancellation, Booth says.

Its PSLF guide includes more in-depth information, as well as links to many resources, including FSA’s PSLF help tool, which can help you determine if your employer is eligible, determine what steps to take, and how to proceed. generate the required documents.

Consider refinancing private student loans

If you have both federal and private loans, Booth suggests evaluating whether refinancing your private loans could help free up money that could be used to pay off your federal loans. Refinancing your private student loans essentially means swapping them with a private lender for a new one, according to CNBC. This could lower your monthly interest payments, the outlet explained, and allow you to choose a repayment plan that fits your needs, including the ability to pay a smaller month over a longer period. You can do this through companies like Juno, SoFi, and Earnest, Booth says.

She cautions against refinancing federal loans, which could disqualify you from any further concessions that may be granted to them. Further relief is certainly possible: after all, we are still in a pandemic, and President Biden has expressed support for the federal loan cancellation.

In a perfect world, we would write off student loans completely. Marginalized people who don’t have access to generational wealth to cover the cost of higher education often have no choice but to take out student loans, says Paulino. Indeed, according to, black graduates – whose families have been legally denied the right to build generational wealth – owe on average $ 25,000 more in student debt than their white counterparts. “It has an impact on the ability of people to create wealth,” says Paulino. “It’s different to start your career with negative net worth versus having positive net worth. “

Meanwhile, people are often ashamed of their student debt, she adds, when it is really the product of a failing system. In addition to following her and Booth’s advice on resuming your payments, she also recommends contacting your Senator to advocate for the cancellation of the student loan. It is a question not only of personal finances, but also of social justice.

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