How to prepare to pay your student loans when pandemic payment pause ends
BATON ROUGE, La. (WAFB) - There has been a three-year pause on student loan payments. It will end in summer of 2023 regardless of how the Supreme Court rules on the White House plan to forgive billions of dollars in student loan debt. This could put you in bind as student loan payments restart.
President Joe Biden recently signed legislation to avert a default and raise the debt ceiling and as part of that legislation, the president can no longer extend the pause on student loan payments that’s been in place since the beginning of the pandemic. Student loan borrowers will have to start paying federal loans by the end of August. On top of that interest will begin to accrue on those loans again.
Jack Caporal, Research Director at the Motley Fool said there are a couple of steps that borrowers can begin to take to prepare for the resumption of student loan payments. First, you should prep your summer budget as if student loan payments will resume and debt will not be forgiven.
“I know that there is a case a case before the Supreme Court about whether or not student loan debt will be forgiven,” said Jack Caporal, Research Director at the Motley Fool. “My advice would be to prepare for the worst and assume that that debt will not be forgiven, and you will eventually have to start repaying it. You should double check what you were paying before the pause and student loan payments and refactor that into your budget.”
He said to look at what you’ve been spending more on as a result of the pause and payments and kind of figure out where there’s a little wiggle room where you can cut back on that new spending in order to make your new student loan payments. Caporal’s biggest piece of advice is to not miss any payments. If you think you’re going to have trouble making payments once they resume later in this summer, contact your student loan provider as soon as possible.
Experts said there are about 43 million Americans who have federal student loans. Before the pause, about 15% of those borrowers were already behind on payments.
Caporal said this could have a really large impact when it comes to credit score and other penalties. If folks fall behind on their payments to average student loan payment before the pandemic was around $300 to $400 a month. So when you’re looking at kind of the average monthly expenditure per American, that’s a sizable chunk of cash that they need to be prepared to have come out of their budget once again.
“Meeting with an advisor, if you have one accessible to you, is always a great idea,” said Caporal. “Especially if you’re not sure where in your budget you can find room to make those student loan payments. Once they kick back in later in the summer, your advisor can help you figure out how to move stuff around in your budget in order to make space for the student loan payment.”
Click here for student loan debt statistics in 2023.
Again, if you think you’re not going to be able to make your payment, contact your loan service provider and start talking about an income driven repayment plan.
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