“How to Manage Your Finances as Federal Student Loan Payments Resume”

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When Will the Federal Loan Payment Pause End?

The federal student loan payment pause, which began in March 2020, is coming to an end. Presidents Trump and Biden extended the pause eight times, but a recent law passed by Congress to raise the debt ceiling limit prohibits further extensions. As a result, federal student loans will start accruing interest again on September 1, 2023, and monthly payments will resume on October 1, 2023. If you have recently graduated, your student loan payments will be subject to a six-month grace period based on your graduation date.

What if I Can’t Afford My Student Loan Payments?

According to the Consumer Financial Protection Bureau, about 20% of federal loan borrowers face financial challenges that could make resuming student loan payments difficult. If you are worried about affording your payments, consider the following options:

Revamp Your Budget

With no student loan payments for over three years, your current budget might not accommodate this new expense. Review your recent budget and identify areas where you can cut back. For instance, you might cancel unused streaming services or reduce spending on dining out. If necessary, consider more significant changes like finding a cheaper place to live or taking on a roommate.

Increase Your Income

Look for ways to boost your monthly income. You could ask your employer about overtime opportunities, take on a second job, or start a side hustle. Evaluate your available time and skills to find the best opportunities for you.

Request Deferment

There are eight types of federal student loan deferment, including options for current students, unemployed borrowers, and those experiencing economic hardship. Contact your student loan servicer to see if you qualify. Note that interest may continue to accrue during deferment, except for direct subsidized loans, where the government covers the interest.

Seek Forbearance

Federal student loan forbearance allows you to pause your payments for up to 12 months at a time. You may qualify if you face financial difficulties, medical expenses, or employment changes. Forbearance is also available for AmeriCorps members, medical or dental residents, and National Guard members. Keep in mind that interest will continue to accrue during forbearance.

Check With Your Employer

Some employers offer student loan repayment assistance as a benefit. Check with your human resources department to see if this is available to you and understand the requirements.

Get on an Income-Driven Repayment Plan

The federal government offers four income-driven repayment plans that can reduce your monthly payments to 10% to 20% of your discretionary income and extend your term to 20 or 25 years. Any remaining debt will be forgiven at the end of the term. Note that you must recertify your income annually, and your monthly payment may not cover accruing interest, potentially increasing your balance over time.

Consider All of Your Options for Student Loan Relief

As the student loan payment pause ends, explore all available relief options to manage your monthly payments. Start by assessing your financial situation to see if you can adjust your budget. If you are unsure about making ends meet, research and compare different relief options. Avoid missing payments to protect your credit score.

As you prepare for student loan payments to resume, monitor your credit regularly to understand how your actions impact your credit score and to manage potential issues as they arise.

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