BusinessCourtsFinancial WellnessGeneral NewsJoe BidenKevin McCarthyU.S. NewsWeekend Reads Here’s how to prepare to start paying back your student loans when the pandemic payment freeze ends by Andrew Wright June 4, 2023 written by Andrew Wright June 4, 2023 0 comments Bookmark 62 How to Prepare for Resuming Student Loan Payments After the Pandemic Freeze As the three-year pause on student loan payments comes to an end, it is important to prepare for the resumption of payments, irrespective of the Supreme Court’s ruling on the White House plan to forgive student loan debt. If a debt ceiling deal negotiated by House Speaker Kevin McCarthy and President Joe Biden is approved by Congress, payments will resume in late August, eliminating any hope for further extension of the pause that began during the COVID-19 pandemic. Even if the deal falls through, payments will restart 60 days after the Supreme Court decision, which is expected before the end of June. It is essential for over 40 million borrowers to be ready to start repaying their loans by the end of the summer at the latest. Here’s what you need to know to prepare for the resumption of student loan payments: Delay Payments and Save: Betsy Mayotte, President of the Institute of Student Loan Advisors, advises against making any payments until the pause has officially ended. Instead, save the money you would have used for payments in a savings account. By doing so, you maintain the habit of making payments while earning some interest. Hold off on sending the money towards your student loans until the last minute of the 0% interest rate. Utilize Loan-Simulator Tools: To determine the payment plan that best suits your needs, it is recommended to use the loan-simulator tools available on websites like StudentAid.gov or the Institute of Student Loan Advisors. These calculators help you understand the monthly payment amounts under different plans and the long-term costs associated with each option. It’s crucial to consider the long-term impact when selecting a plan, rather than opting for the lowest monthly payment without evaluating the overall costs. Reevaluate your plan as your financial situation improves. Understand Income-Driven Repayment Plans: An income-driven repayment plan sets your monthly payment based on your income and family size, aiming to make it affordable. It considers various expenses in your budget, and most federal student loans are eligible for these plans. The payment amount under such plans is usually a percentage of your discretionary income, and it can be as low as $0 per month if your income is low enough. To repay your federal student loans under an income-driven plan, start by filling out an application through the Federal Student Aid website. Seek Guidance from Advisers: Consider speaking with a mentor or financial advisor to educate yourself about your options and ensure you are enrolled in the most suitable income-driven repayment plan. The Federal Student Aid website can direct you to counselors and organizations like the Student Borrower Protection Center and the Institute of Student Loan Advisors for assistance. Payment Plans and Financial Constraints: While payment plans are always available, it is advisable to wait for now if your budget does not allow you to resume payments. During the pause on payments and interest accrual, there are no financial penalties for nonpayment. If you find yourself in a short-term financial bind, you may qualify for deferment or forbearance, allowing you to temporarily suspend payments. However, it’s important to note that interest continues to accrue during deferment or forbearance, and it can impact potential loan forgiveness options. Contact your loan servicer to determine whether deferment or forbearance is suitable for your situation. Strategies to Reduce Costs: Enroll in automatic payments to receive a quarter percent reduction in your interest rate. Consider income-driven repayment plans if you expect to qualify for forgiveness under the Public Service Loan Forgiveness program. Opt for the lowest monthly payments to have the remaining debt canceled after completing the required number of payments. Reevaluate your monthly student loan repayment during tax season when you have all your financial information available. Determine if you can afford to increase or decrease your payments. Customize your payment schedule to fit your preferences. Instead of one large monthly payment, consider breaking it into two installments per month. Loan Forgiveness and Assistance: For borrowers who have worked for a government agency or a nonprofit, the Public Service Loan Forgiveness program offers cancellation after ten years of regular payments. Additionally, some income-driven repayment plans can cancel the remaining debt after 20 to 25 years. Ensure you are enrolled in the appropriate income-driven repayment plan to qualify for these programs. Borrowers defrauded by for-profit colleges may also apply for borrower defense and receive relief. These loan forgiveness programs will not be affected by the Supreme Court ruling. Note: The Big Big News receives support from Charles Schwab Foundation to improve financial literacy through educational reporting. The foundation is independent of Charles Schwab and Co. Inc. The AP is solely responsible for its journalism. Table of Contents FAQ about student loan repaymentHow can I prepare for the resumption of student loan payments?What are income-driven repayment plans?What should I do if I can’t afford to resume student loan payments?Can I reduce costs when paying off my student loans?Are student loans forgiven after a certain period?More about student loan repayment FAQ about student loan repayment How can I prepare for the resumption of student loan payments? To prepare for the resumption of student loan payments, it is advisable to delay payments until the pause has officially ended and save the money in a separate account. You can use loan-simulator tools to find a suitable payment plan, and it’s important to consider the long-term costs. Seeking guidance from a mentor or financial advisor can also be beneficial in understanding your options and enrolling in the appropriate income-driven repayment plan. What are income-driven repayment plans? Income-driven repayment plans set your monthly student loan payment based on your income and family size, making it more affordable. These plans consider different expenses in your budget, and most federal student loans are eligible. Your payment amount is typically a percentage of your discretionary income, and it can be as low as $0 per month. To enroll in an income-driven plan, you need to fill out an application on the Federal Student Aid website. What should I do if I can’t afford to resume student loan payments? If your budget doesn’t allow you to resume payments, you may qualify for deferment or forbearance, which temporarily suspend payments. Contact your loan servicer to discuss these options. It’s important to note that interest continues to accrue during deferment or forbearance. Additionally, if you’re in a short-term financial bind, you can consider adjusting your payment plan or exploring payment assistance programs available through your loan servicer. Can I reduce costs when paying off my student loans? Yes, there are strategies to reduce costs when repaying your student loans. Signing up for automatic payments can result in a quarter percent reduction in your interest rate. If you anticipate qualifying for forgiveness under the Public Service Loan Forgiveness program, opting for the lowest monthly payments is beneficial. During tax season, reevaluating your monthly payment based on your financial situation can help determine if you can increase or decrease the payment amount. Breaking up payments into smaller installments is also an option to consider. Are student loans forgiven after a certain period? Yes, there are forgiveness options for student loans. The Public Service Loan Forgiveness program offers cancellation after ten years of regular payments for those working in government agencies or nonprofits. Additionally, some income-driven repayment plans cancel the remaining debt after 20 to 25 years. It’s important to ensure you’re enrolled in the right income-driven repayment plan to qualify for these programs. Borrowers defrauded by for-profit colleges may also be eligible for relief through borrower defense programs. More about student loan repayment StudentAid.gov: Official website providing resources and information on student loans and repayment options. Institute of Student Loan Advisors: Organization offering student loan advice and resources for borrowers. Federal Student Aid: Official website for federal student aid programs, including income-driven repayment plans and loan forgiveness information. Student Borrower Protection Center: Nonprofit organization focused on advocating for student loan borrowers and providing assistance. Charles Schwab Foundation: Independent foundation supporting financial literacy initiatives, including educational reporting. Public Service Loan Forgiveness Program: Information on the Public Service Loan Forgiveness program, which offers loan cancellation after ten years of qualifying payments for eligible borrowers. Borrower Defense: Details on borrower defense programs that provide relief for students defrauded by for-profit colleges. You Might Be Interested In U.S. Visitor Detained in Israel for Damaging Ancient Roman Artifacts at a Jerusalem Museum DuckDuckGo founder says Google’s phone and manufacturing partnerships thwart competition Minors Accused of Acid Application on Playground Equipment Resulting in Four Child Injuries They were alone in a fight to survive. Maui residents had moments to make life-or-death choices Joe Biden Honored to Deliver Jimmy Carter’s Eulogy Endangered red wolves need space to stay wild. But there’s another predator in the way — humans borrower defenseBusinessCourtsdebt ceiling dealdefermentfinancial advisorfinancial literacyfinancial planningFinancial WellnessforbearanceGeneral Newsincome-driven repaymentJoe BidenKevin McCarthyloan forgivenessloan repaymentloan servicerloan-simulator toolpandemic payment freezepayment strategiesPublic Service Loan Forgivenessstudent loansSupreme Court rulingU.S. NewsWeekend Reads Share 0 FacebookTwitterPinterestEmail Andrew Wright Follow Author Andrew Wright is a business reporter who covers the latest news and trends in the world of finance and economics. He enjoys analyzing market trends and economic data, and he is always on the lookout for new opportunities for investors. previous post Vatican Altar Desecrated by Nude Protester: Cardinal Performs Rite of Restoration next post Florida Panthers Fall to Vegas Golden Knights in Stanley Cup Final’s Opening Game You may also like Bookmark A woman who burned Wyoming’s only full-service abortion... December 28, 2023 Bookmark Argument over Christmas gifts turns deadly as 14-year-old... December 28, 2023 Bookmark Danny Masterson sent to state prison to serve... December 28, 2023 Bookmark Hong Kong man jailed for 6 years after... December 28, 2023 Bookmark AP concludes at least hundreds died in floods... December 28, 2023 Bookmark Live updates | Israeli forces raid a West... December 28, 2023 Leave a Comment Cancel Reply Save my name, email, and website in this browser for the next time I comment. Δ