4 things you should do before student loan payments restart

BY Sydney LakeDecember 21, 2021, 9:23 PM
Royce Hall on the campus of the University of California, Los Angeles (UCLA), as seen in November 2021.
Royce Hall, on the campus of the University of California, Los Angeles, in November 2021.
Al Seib—Los Angeles Times/Getty Images

The time is near. In just less than 50 days tens of millions of federal student loan borrowers must resume making payments after a nearly two-year reprieve. The freeze on federal student loan payments began in March 2020 under the CARES Act and has since been extended five times. 

The goal of the forbearance period was to provide federal student loan borrowers extra room in their budget to pay for necessities like housing—especially if their employment or income had been affected by the pandemic. Payments will resume on Feb. 1, 2022. 

“After nearly two years of payments being frozen, borrowers must assess where they stand financially and consider what’s changed since the last time they were making payments,” Kevin Walker, CEO of College Finance Co., tells Fortune. “Getting their finances in order will help them choose the repayment plan best suited for them.”

With just weeks to go until payments are due, Fortune checked in with student loan experts to compile a to-do list for borrowers ahead of the forbearance end date. Below are four things you should do before Feb. 1, 2022, to ensure you’re ready to make your student loan payments once again.

1. Contact your federal loan servicer

Borrowers should first contact their federal loan servicer to get an update on their accounts and confirm their payment due date, Andrew Pentis, a certified student loan counselor with Student Loan Hero, tells Fortune. 

“If you have questions about what you see, check in directly with your loan servicer,” Walker adds. “Do this sooner rather than later, as servicers will likely receive a lot of inquiries as repayment comes closer.”

It’s also important to double-check that your servicer has your most updated contact information, since a few federal loan servicers have ended their contracts. This means some federal loan accounts could have been moved to a new servicer. When you’re speaking with your federal loan servicer, you can also explore options for postponing payments further, he says.

“Borrowers who aren’t feeling financially ready to resume payments could look to enroll in an income-driven repayment plan, for example, that would cap their monthly dues at a percentage of their income,” Pentis says. “They might also look into deferments and forbearances that would keep their loans in postponed status, although at the expense of accruing interest.”

2. Check whether you qualify for any loan forgiveness programs

This year, President Joe Biden has announced several rounds of student loan forgiveness targeting borrowers with total and permanent disabilities, borrowers who attended now-defunct institutions, and public service workers. 

Tobin Van Ostern, cofounder of Savi, a tech company that finds new repayment and forgiveness options for people with student loans, says to check this eligibility through the Federal Student Aid (FSA) website and your servicer’s website.

“This will ensure that you’ll receive any important notifications about when your bill is due, how much your payment is, or if you’re eligible for any changes via the expanded PSLF [Public Service Loan Forgiveness] waiver, among other things,” he tells Fortune.

3. Consider changing your payment method

You might also be eligible to switch to an income-driven repayment (IDR) plan, which sets a borrower’s student loan payment at an affordable amount based on income and family size. The FSA office offers four IDR options, which limit monthly dues to only 10% to 20% of a borrower’s income. Rates are established to help borrowers pay off their loans within a 20-year to 25-year period.

Seeking an IDR plan “does make a lot of sense for people whose income has dropped during the pandemic to see if the payments would be lower considering the new income,” Patti Hughes, principal of Lake Life Wealth Advisory Group, previously told Fortune. 

Amanda Push, a higher education and student debt expert with Student Loan Hero, also suggests looking into debt consolidation and student loan refinancing. 

Debt consolidation means that borrowers can take their individual student loans—say, a couple of federal student loans and a private student loan—and roll them into one loan, as Push puts it. Some borrowers are currently in the process of consolidating their loans to qualify for the Public Service Loan Forgiveness program, which only counts federal direct loan payments toward forgiveness. 

Refinancing is another option for student loan borrowers. This option could help you “score a lower interest rate as well as modify your monthly payment amounts to align more with your budget,” Push says. 

“However, student loan refinancing is not without its pitfalls as you would change your debts over from being federal loans to private loans, missing out on access to federal support programs,” she warns.

4. Talk to your employer

This year, more companies started offering assistance to their employees with student loan debt—whether it be providing information sessions about certain loan programs or offering to help pay off their employees’ debt. 

“The impact student debt has on your paycheck could be putting a dent in your overall financial wellness,” Jeff Cimini, senior vice president of retirement product management at Voya Financial, tells Fortune. “To help offset these costs, one place working individuals might not always look [to] for support is their employer.”

Some companies will offer direct payments for student loan repayment, and some will make direct after-tax contributions to help pay off their employees’ debt, he adds—encouraging borrowers to ask their company about any available options.

“Broadly, employer support can help individuals pay down their debt more quickly—and, in turn, enable them to instead save more for short-term needs, like emergency savings,” Cimini says.

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