What You Need to Know as the Student Loan Payment Pause Comes to an End
- Author: Jenny Wolff
- Posted: 2024-06-26
Millions of borrowers are back on the hook to resume payments of federal student loans. The end of the pause on these payments comes as a result of the U.S. Supreme Court ruling to end the plan of the Biden Administration to forgive student loans up to $20,000. The end of the payment pause is set for September 1, leaving many borrowers wondering what steps they need to take now.
The adjustment to resume these payments may be difficult for many families, particularly as the economy continues to sputter along and inflation remains high. This is the time to begin to strategize how you can ease back into these payments without causing havoc in your budget. Here are a few things to consider during this transition period.
Contact Your Loan Provider
The first step as you re-engage with the payment process is to contact your loan provider. There was a good amount of upheaval during the forbearance period as many loan providers consolidated with other servicers. This means that your provider may now be managed by a different organization.
You can find more information about your specific provider by consulting the Federal Student Aid website. Be sure to take this transition time to confirm all of your contact information so that you ensure that you are not missing out on any important instructions regarding the repayment options. Providers will be more in demand as the time to restart payments draws closer. You can get ahead of the rush by reaching out as soon as possible.
Re-examine Your Budget
The restart of these loan payments could cause a financial hardship for many people. Now is the time to run a fine tooth comb through your budget and make the necessary adjustments. Some borrowers may find that they need to cut expenses to free up the money needed for the loan payments. Once you identify your fixed expenses, you can look at how to cut discretionary costs so that you can resume making these student plan payments.
Finding a part-time job or side hustle can also go a long way in helping to bridge the gap in your budget if the new payments are going to be a hardship. Increasing your cash flow even by a small amount will help to ease the stress of the restart of the payments.
Explore the Forbearance or Deferment Options
Your research may uncover that you are eligible for a deferment or forbearance if an income-based payment plan is not in your best interest. During a deferment, the government will pay the interest amount on qualified subsidized federal student loan payments. However, borrowers are still responsible for the interest on PLUS and unsubsidized loans. Be sure to read the fine print carefully before making this decision.
Like a deferment, a forbearance suspends the loan payments. The difference is that interest will continue to accrue during a deferment. The interest generated is then added to the principal amount of the loan once the repayment period begins.
Research the SAVE Repayment Plan
The U.S. Department of Education announced the creation of the new Saving on a Valuable Education (SAVE) Plan shortly after the decision of the Supreme Court to end the payment pause. This plan will go into effect late this summer. The repayment payment can cut monthly loan payments for those Americans making less than $32,800 per year. The limit jumps to $67,500 for a family of four.
The SAVE plan also changes the amount of income that is deemed to be discretionary. According to the government, SAVE can save borrowers at least $1,000 per year. Borrowers are eligible to enroll in this plan prior to the due date of the first monthly payment. You will automatically be enrolled in SAVE if you are currently enrolled in the Revised Pay as You Earn plan.
Lastly, do not neglect staying on top of the latest news regarding this issue. The Biden Administration has already announced that it is investigating other avenues to ease this burden. Being proactive about resuming your student loan payments will help you to prepare financially for what lies ahead.
