The day we’ve dreaded is upon us: Student loan payments are coming back in May.
In case you haven’t noticed, federal student loans and accumulating debt were temporarily suspended by Congress when the Coronavirus Aid, Relief and Economic Security Act was passed on March 27, 2020. This was done in response to COVID-19 which left millions of Americans with financial uncertainty and unemployment. As the pandemic continued, the pause was extended into 2021, and again until Jan. 31, 20,22. Despite the Biden administration warning that this would be the “final extension,” repayments were then postponed further to May 1, 2022, which brings us to our impending deadline.
The US student loan debt totals $1.749 trillion. Over 65% of today’s college students graduate with student debt and the average federal student loan debt balance sits at $37,113, so if you are worried about the return of repayments, you are definitely not alone.
Are Repayments More Likely to Be Postponed?
President Biden has pushed for student loan forgiveness, hinting that we may see another delay in repayments May. However, this rumor shouldn’t be relied upon until it is officially announced as fact. You should plan for your repayments to begin in May.
How to budget for student loan repayments
It can be difficult to budget and organize your finances in order to pay student loan payments. Here are some tips to help you make this process easier.
Learn about your loans
As with any financial decision or task, it is important that you are aware of your individual situation and rights regarding student loan payments. Is your loan public or private? What is your interest rate? Understanding the workings of your loan and what your options are will help you feel confident about your money and can help you identify if there was a mistake.
Get a Budgeting App
As the management guru Peter Drucker once said, “If you can’t measure it, you can’t manage it.” There is a large variety of budgeting and finance apps available to help you keep track of where your money is going, allowing you to see how you’re spending and where you can cut back. Budgeting for student loan payments can require some rearranging of expenses and luxuries. Apps such as You Need a Budget (YNAB), can help you track, manage, organize and organize your finances to make sure you are on top of your loans.
Pay your Repayment as Soon As You Get Paid
It is important to submit your student loan payment as soon as you receive your paycheck. Even the most organized person can forget things. However, if you arrange for an automatic transfer to pay your student loan payment immediately after you receive your income, you will avoid running out of money on the due date.
Consider a side hustle
Part-time side hustles are becoming more popular and easily accessible, even though it may seem like a tedious and unhelpful piece. Side hustles are a great way for students to earn extra income, whether they’re driving for Uber or Lyft or dog walking online. However, student loan repayments should not be made at the expense or compromise on work-life balance. Not everyone has the option of simply “working more,” and this route should only be taken if it fits your routine.
As much as possible, make additional payments
You can contribute more to your student loans than you need to. This will allow you to pay off the entire amount faster and reduce interest. This obviously isn’t an option for everyone, but if you do happen to have some extra income available, making extra payments now can save you quite a lot in the long run.
Is Refinancing a Good Option?
Refinance student loans means that your lender will pay off your existing loans and then replace them with lower interest rates. This can make a big difference, especially if your repayments are not complete. However, not everyone is eligible for refinance. You will need to have a credit score over 600 and a steady source of income that will cover your expenses and student loan payments in order to refinance. If you aren’t able to meet both of these requirements, you may need a qualifying co-signer.
If you are able to find a lower rate, refinance your student loans. Refinancing doesn’t cost you anything, so if your current interest rates are high or your loans have high variable rates causing unpredictability in your payments, refinancing can be a good option. You should refinance if your loans were taken out through a private lender.
Refinance federal student loan debts becomes private loans. This means that you can no longer receive federal loan benefits. Your student loans will have a completely new contract with new terms and conditions. Federal loans cannot be refinanced once they are refinanced.
Additional Information and Assistance
If you’re still feeling a bit overwhelmed, below, you’ll find a range of options for assistance and further information. Although not everyone is eligible for all the assistance options, these programs can help you to get started to plan and understand your path.
- Federal Student Aid programs, such as the Federal Pell Grant, are available to undergraduate students. To be eligible, you must prove that you have financial needs, that you are a U.S. citizen, or an eligible non-citizen, or that you are currently enrolled at an eligible degree program. However, other requirements may also be relevant.
- You may be eligible for Public Service Loan Forgiveness (PSLF) if you are employed by a federal or state, local, tribal, or non-profit organization. After you have made 120 qualifying monthly payment and worked full-time for a qualifying employer, the PSLF Program forgives any balance on your student loans. Public service workers can be eligible for the rest of their debt forgiveness after 10 years of monthly payments.
- Ask your employer if they offer student loan repayment assistance. Employer-provided student loan repayment can be offered as a tax-free benefit under Section 127. Available through 2025, employers can contribute up to $5,250 per employee annually without raising the employee’s gross taxable income.
- Go to the National Consumer Law Center’s Student Loan Borrower Assistance site for more information on repayments, assistance, and everything in between.
Source: The Every Girl