4 things you should do before student loan repayments restart

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THROUGH Lake SydneyDecember 21, 2021, 9:23 PM

Royce Hall, on the campus of the University of California, Los Angeles, in November 2021.

Al Seib—Los Angeles Times/Getty Images

The time is near. In just under 50 days, tens of millions of federal borrowers are due to resume payments after a nearly two-year reprieve. The freeze on federal student loan repayments began in March 2020 under the CARES Act and has since been extended five times.

The purpose of the forbearance period was to provide federal student loan borrowers with extra room in their budget to pay for necessities like housing, especially if their jobs or income had been affected by the pandemic. Payments will resume on February 1, 2022.

“After nearly two years of payment freezes, borrowers need to assess their financial situation and consider what has changed since they last made payments,” said Kevin Walker, CEO of College Finance Co. Fortune. “Getting their finances in order will help them choose the repayment plan that’s right for them.

With only a few weeks before payments are due, Fortune checked with student loan experts to compile a to-do list for borrowers before the forbearance end date. Below are four things you should do before February 1, 2022 to make sure you’re ready to make your student loan payments again.

Borrowers should first contact their federal loan officer to get an update on their accounts and confirm their payment due date, says Andrew Pentis, a certified student loan counselor with Student Loan Hero. Fortune.

“If you have any questions about what you see, check directly with your loan officer,” adds Walker. “Do it as soon as possible, as repairers will likely get a lot of inquiries as reimbursement nears.”

It’s also important to check that your servicer has your most up-to-date contact information, as a few federal loan servicers have terminated their contracts. This means that some federal loan accounts could have been transferred to a new servicer. When you speak with your federal loan officer, you can also explore options for further deferring payments, he says.

“Borrowers who don’t feel financially ready to resume their payments might consider enrolling in an income-based repayment plan, for example, which would cap their monthly contributions to a percentage of their income,” says Pentis. “They could also consider deferrals and forbearances that would keep their loans in deferred status, albeit at the expense of accrued interest.”

2. Check if you qualify for loan forgiveness programs

This year, President Joe Biden announced several rounds of student loan forgiveness targeting borrowers with total and permanent disabilities, borrowers who attended now-defunct institutions, and government workers.

Tobin Van Ostern, co-founder of Savi, a tech company that finds new repayment and forgiveness options for people with student loans, says to check that eligibility through the Federal Student Aid (FSA) website and the your agent’s website.

“This will ensure that you receive all important notifications regarding your bill due date, payment amount, or whether you are eligible for changes through the extended PSLF. [Public Service Loan Forgiveness] renunciation, among others”, he says Fortune.

3. Consider changing your payment method

You may also be eligible to switch to an income-contingent repayment (IDR) plan, which sets a borrower’s student loan payment at an affordable amount based on income and family size. The FSA office offers four IDR options, which limit monthly contributions to just 10% to 20% of the borrower’s income. Rates are set to help borrowers repay their loans over 20 to 25 years.

Finding an IDR plan “makes a lot of sense for people whose incomes have dropped during the pandemic to see if payments would be lower given new income,” said Patti Hughes, director of Lake Life Wealth Advisory Group, previously. . Fortune.

Amanda Push, higher education and student debt expert at Student Loan Hero, also suggests looking into debt consolidation and student loan refinancing.

Debt consolidation means borrowers can take their individual student loans — say, a few federal student loans and a private student loan — and bundle them into one loan, as Push puts it. Some borrowers are currently consolidating their loans to qualify for the Public Service Loan Forgiveness Program, which only counts federal direct loan payments for forgiveness.

Refinancing is another option for student borrowers. This option could help you “get a lower interest rate and change your monthly payment amounts to better align with your budget,” says Push.

“However, refinancing student loans is not without pitfalls, as you would be turning your federal loan debt into private loans, without access to federal support programs,” she warns.

4. Talk to your employer

This year, more companies have started offering help to their employees struggling with a student loan, whether it’s offering information sessions on certain loan programs or offer help to repay the debt of their employees.

“The impact of student debt on your salary could hurt your overall financial well-being,” said Jeff Cimini, senior vice president of retirement product management at Voya Financial. Fortune. “To help offset these costs, people who work at a location don’t always seek [to] for support is their employer.

Some companies will offer direct payments for student loan repayments, and some will make direct after-tax contributions to help pay off employee debt, he adds, encouraging borrowers to ask their company what options are available. .

“Overall, employer support can help individuals pay off debt faster and, in turn, allow them to save more for short-term needs, like emergency savings,” Cimini says.

See how the schools you are considering fared Fortune’s rankings of the best part-timers, executives, full-timers, and online MBA programs.

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