Student Loan Payments will Restart in October 2023
Following a three-year hiatus that started in March 2020 due to the pandemic, the U.S. Department of Education has recently released an announcement, stating that the payments for individuals carrying student loan balances will resume this Fall.
If you’re feeling anxious about the news, you’re certainly in good company—nearly 37 million borrowers will be paying student loan interest beginning September 1, 2023, with payments to follow in October. As protections end, here are some ways to get ahead in your financial planning.
1. Confirm what you owe.
So, how’s your memory after the longest payment freeze of federal student debt in history? As a first step, you’ll need to determine your current balances and who your loan servicers are. The Federal Student Aid website is the easiest and most efficient way to access this information. You’ll first need to log in with your FSA ID (which you can create here if you don’t have one already.) Once logged in, you can view the original principal amount, current balance, and interest rate. Keep in mind that current loan amounts are subject to change.
As of this writing, the Supreme Court has yet to issue a ruling on Biden’s plan to cancel up to $20,000 in student loan debt. If you have private loans, this information won’t appear on the Federal Student Aid website. You have a few options here:
- You can log into your lender’s website or app—if you’re unsure of who your provider is—you can visit AnnualCreditReport.com to access your free, weekly credit report which lists loans in your name.
- You can contact your school’s financial aid office directly. They can likely help track information, as most private loans are school-certified.
Something to note: some loan providers ended services or transferred contracts during the pandemic so it’s worth double-checking to confirm your information hasn’t changed.
2. Evaluate your repayment plan.
After the lengthy payment pause, it’s a good idea to revisit overall affordability. Based on your current monthly income and expenses, you might find that resuming payments for federal student loans creates pain points when it comes to budgeting. The Department of Education has a loan simulator that can provide options if you’re concerned about managing the additional expense. Spend some time deciding which payment plan fits your goals (lower payments? Faster payoffs?) and consider switching to an income-driven repayment plan. This takes your earnings into account and may help lower your monthly payment.
3. Consider loan consolidation.
If you currently have federal student loans with multiple loan servicers, consolidation can greatly simplify loan repayment by giving you a single loan with one monthly bill. This option will depend on your specific financial picture, so be sure to do your research. Here are some pros and cons:
- One bill: Having fewer bills to keep track of makes staying on top of payment deadlines more manageable and reduces the chances of missing or late payments which have a direct impact on your credit score.
- Fixed-rate: keeping your rate has the probability of saving you interest in the long run.
- Longer repayment: While having a longer repayment period does translate to a lower monthly payment, the flipside of that equation is that you’ll be in debt longer and it will cost you more interest over time.
- Loss of federal benefits and forgiveness: In deciding to consolidate loans that aren’t Direct Loans, it’s possible that you could lose access to interest rate discounts, principal rebates, income-based repayment plans, and forgiveness programs like PLSF.
4. Make a plan.
If you’re feeling anxious and overwhelmed when it comes to preparing your finances around student loan repayment in October, we can help. At Alltru, we aren’t just financial wellness experts, we’re humans who have experienced firsthand the challenge of balancing student loan repayment with everyday living costs.
Our empathetic and certified financial counselors can help review your budget and develop a personalized plan to mitigate the impact of student loan repayment when October arrives. Let us help you find financial peace.
Until next time,