After more than three years, the temporary pause on federal student loan payments is coming to an end.
For many individuals, the thought of resuming student loan payments in October creates stress and raises new financial concerns. However, by taking proactive steps to prepare now, you can alleviate some of the anxiety and ensure a smoother transition.
So, if you want to lower your financial stress, consider the following ways to prepare yourself for the resumption of student loan payments.
Review your loan terms
Take time to familiarize yourself with your loan terms, including interest rates, repayment options, and any potential changes that may have occurred during the pause.
Additionally, find out when your next payment will be due so you can be ready by that date. Understanding these details will enable you to make informed decisions and plan ahead.
Apply for a lower payment
Evaluate your current financial position by reviewing your income, expenses, and savings. Determine how much you can afford to allocate toward student loan payments while still meeting other financial obligations.
If you are earning less than you were when the payment pause began, you might be eligible for a lower monthly payment moving forward. Income-driven repayment plans are based on income and can make payments more affordable.
Create a budget
Create a comprehensive budget that encompasses all your expenses and income. Budgeting is important for your financial health in general, but it is particularly important when it comes to preparing to repay student loans.
By tracking spending, you can identify areas where you can cut back or make other adjustments. This allows you to allocate more toward your student loan payments each month.
Explore repayment options
It’s a smart idea to research various repayment options available to you, such as income-driven repayment plans, refinancing, or loan forgiveness programs.
For example, certain individuals may be eligible for loan relief if they are employed by a federal, state, local, or tribal government or not-for-profit organization.
Create an emergency fund
Building an emergency fund is a crucial tool that helps you handle unexpected expenses without falling into further debt.
Whether it’s an unexpected job loss, a surprise medical or car repair bill, or the resumption of student loan payments, having those cash reserves can save you from financial trouble.
As a general rule of thumb, aim to have at least three to six months' worth of living expenses set aside to provide a safety net during financial emergencies.
Seek professional advice
If you are struggling to pay your obligations, consider consulting with a financial advisor who specializes in student loans.
An advisor should have the expertise to provide personalized guidance based on your specific situation. Such advice can help you make sound financial decisions and optimize your repayment strategy moving forward.
Refinance or consolidate loans
Explore the option of refinancing or consolidating student loans. This process can potentially lower your interest rate, reduce monthly payments, and simplify the repayment process by combining multiple loans into one.
The end result might be more cash flow and keeping more money in your wallet each month.
Understand what happens if you don’t repay your loan
It's important to have a clear understanding of the consequences of failing to repay student loans. Defaulting on loans can have serious ramifications, ranging from a damaged credit score to the withholding of tax refunds.
So, motivate yourself to prioritize loan repayment and explore alternative options to avoid the long-term financial consequences of default.
Automate loan payments
Consider setting up automatic payments to ensure you never miss a due date. Automating student loan payments helps you stay organized and on top of things.
This is especially important if you have a history of forgetting to make all of your payments by their due dates.
Seek out a side hustle
Side hustles have become vital sources of income for so many people, especially since the initial onset of the pandemic. Consider finding ways to increase your income to offset the impact of resuming student loan payments.
Explore part-time job opportunities, freelance work, or side gigs that align with your skills and schedule.
Ask your loan servicer for relief
As a last resort, if you find yourself struggling to make student loan payments, reach out to your loan servicer for assistance.
Explain your situation and inquire about potential short-term relief options, such as deferment or forbearance.
While these options have downsides, temporary relief can provide financial breathing room and prevent you from defaulting on loans.
Preparing yourself for the resumption of student loan payments is essential to ensure a smooth transition and to maintain your overall financial stability.
The ways to prepare for the resumption of student loans that are on this list are a great starting point. Now, it’s time to complete the journey that ends when you finally climb out of debt for good.