Student Loan Payments Are Due Soon, Here's How You Can Prepare

• Author: Jessica Williams
• Posted: 2024-04-07

For most of the COVID-19 pandemic, federal student loan payments have been under a moratorium, providing some much needed financial breathing room for millions of people. However, it's been announced that payments are going to be mandatorily resumed in early May 2022.

Despite how the powers at be feel confident people are generally able to pay back their student loans, around 93% of borrowers still feel unready to resume payments.

If you're one such borrower, here are some strategies you can use to prepare for the moratorium ending.

Consider Refinancing

One of the first things you should consider when thinking of paying off student loans is to see whether you can refinance.

Refinancing puts you in a position where you're able to take unfavorable loan terms you might be subject to at the moment and replace them with ones that better fit your financial situation. The refinancing process allows you to take multiple student loans you might have, potentially at very high interest rates, and consolidate them into a single loan.

This can simplify repayments considerably by limiting the number of outstanding loans you have and also reducing the amount of effort you need to put into calculating interest.

It should be noted that refinancing, while enticing, has to be done properly in order for you to properly benefit and is typically only an option offered to you if you're of sound financial health.

Consider An Income-Based Repayment Plan

Most federal student loans come with options for making payments based on income. By default, minimum payments are based around a 10 year timeline for getting a loan completely paid off, which can result in very substantial monthly expenditures.

If you're not in the best financial situation, it's possible to apply for income-driven repayment (IDR) plans to reduce monthly payments to a fraction of what they currently are. There are several different IDR plans available, but they all essentially allow you to scale your monthly payments with your income, so if your income is low for the time being and might be for a while longer, then it's a viable and appropriate option.

IDR plans will end up doubling, sometimes more, the amount of time it will take to end up paying back your loan in full, but if the pandemic hit your finances especially hard, then it might be necessary.

Loan Forgiveness Programs

Both federal agencies and private organizations often provide valued employees with the option of having their student loans forgiven.

Among private organizations, it's entirely possible that if you're a highly skilled, indispensable employee that your employer will offer to pay off your student loans as part of an offer to keep you on or promote you.

In terms of federal loan forgiveness, it's a bit more structured and less subject to discretion. If you're a teacher or have served in the military, there are a multitude of programs out there that partially or completely eliminate your student loan debt and place caps on the amount of interest you have to pay.

Alternatively, there are Public Service Loan Forgiveness (PSLF) plans, which eliminate the student loan debt of certain government employees or people who work for non-profits after they pay their loans off over the course of about 10 years.

Straight-up loan forgiveness is rare, but it's still worth looking into.

Take Advantage of Payment Timing

More than just making payments in general, how you time your student loan payments, and in what manner, can go a long way towards reducing student loan burden.

First off, it's usually a good idea to take your required student loan payment and break it up into smaller payments over the course of a month to reduce the long-term interest you'll have to pay. Beyond this though, if you happen to have any spare money lying around and you feel like you won't immediately need it, then it would be a good idea to put that towards paying off your loans while interest isn't accumulating.

Additionally, keep in mind that student loan servicers offer financial incentives for people who use autopay options as it keeps administrative costs to a minimum, so consider setting up automatic payments.

Keeping Up With Everything

Paying back student loans is a difficult prospect at the best of times, but after a major pandemic, it's especially daunting. While inconvenient, keep in mind that you have options to lessen the burden.