The student loan payment pause, also called administrative forbearance, is meant to provide COVID-19 financial relief to folks who have federal student loans. Mandatory repayment, interest, and collections of federal student loans have been on hold since March 2020, but the administrative forbearance is set to expire soon. If you have federal student loans, then you will be required to start making those payments again.
The student loan payment pause may have given you some much-needed financial relief. Transitioning back to making payments again might feel challenging, but there are steps you can take to feel confident and prepared.
When does student loan forbearance end?
The student loan payment pause is set to expire as early as this summer, but there is still some uncertainty about when it will end. For more details on when the pause will end and when payments will resume, visit StudentAid.gov.
How to prepare for student loan repayment
1. Clarify your monthly payment and due date
You can expect your monthly payment and due date to be the same as they were before the student loan payment pause began, but it’s a good idea to double-check. If you haven’t already done so, create an online account with your student loan servicer and log in to get the details. You can also call them for this information. You will need to do this for each servicer if you have more than one. In addition to your payment amount and due date, confirm that your contact information is current so you don’t miss any important notifications about your student loans.
If you want to enroll in autopay, now is the time to set that up to avoid missing an upcoming payment. Participating in automatic payments may also reduce your interest rate.
2. Review your budget
Once you’re clear on your monthly payment amount, you’ll want to review your budget to see if it can cover your student loan payment. A working budget makes room for the following:
- Necessities: Your housing payment, utilities, phone bill, student loan payment, and other essential bills
- Wants: Shopping, eating out, and other discretionary purchases
- Financial goals: Retirement contributions, emergency funds, and money you set aside each month for long- and short-term goals
After factoring in your student loan payment, does your monthly spending plan feel comfortable or stretched thin? If things are tight, consider cutting or reducing some expenses.
3. Assess your repayment plan
The standard repayment period for federal student loans is 10 years. If your financial circumstances have changed since the student loan payment pause began, you may want to consider alternative federal repayment plans that might work better for your budget, such as:
- Graduated Repayment Plan
- Extended Repayment Plan
- Revised Pay As You Earn Repayment Plan (REPAYE)
- Pay As You Earn Repayment Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
- Income-Sensitive Repayment Plan
If you want to make changes to your repayment plan, contact your servicer to understand your options and eligibility.
4. Think about refinancing your student loans
Consolidating your student loans can help you better manage your loans by combining them into one, new loan to pay each month. You may be able to extend the duration of your loan and/or lower your interest rate, which can reduce your monthly payment. Keep in mind that when you extend your loan repayment, you end up paying more in interest so your loan costs more.
If you have multiple federal student loans, you can apply for a Direct Consolidation Loan. Private lenders also have consolidation loans that can combine federal and private loans into one. It’s important to note that if you consolidate federal loans into a private consolidation loan, you’ll lose any benefits associated with those loans.
5. Understand your options if you can’t afford to make payments
If you still can’t afford to make payments, you can explore deferment or forbearance for your federal student loans, which allow you to temporarily reduce or postpone payments. With deferment, interest will not accrue on your loan balance. During forbearance, interest will continue to accrue. Keep in mind these are temporary solutions and can result in higher monthly payments when your loans come out of deferment or forbearance.
It's best to avoid missing or making late payments, so contact your servicer before you miss a payment if you can. Federal student loans are considered delinquent the first day after a missed payment. Loans that are delinquent for 90 days or longer will be reported to the national credit bureaus, which will likely hurt your credit score. Continued delinquency can cause you to default on your student loans.
If you have any questions or concerns about resuming your federal student loan payments, then reach out to your servicer. You can discuss your financial situation and see what options you have to keep you on track.