{"id":58381,"date":"2023-09-08T05:34:41","date_gmt":"2023-09-08T09:34:41","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/how-to-prepare-your-finances-for-restarting-student-loan-payments\/"},"modified":"2023-09-08T05:34:44","modified_gmt":"2023-09-08T09:34:44","slug":"how-to-prepare-your-finances-for-restarting-student-loan-payments","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=58381","title":{"rendered":"How to prepare your finances for restarting student loan payments"},"content":{"rendered":"
\n

This <\/em>article<\/em> is reprinted by permission from <\/em>NerdWallet<\/em>.\u00a0<\/em><\/p>\n

Federal student loan repayment resumes in the coming months \u2014 interest begins accruing in September, with payments starting in October \u2014 after a 3\u00bd-year payment pause. According to a\u00a0new NerdWallet survey, most federal student loan borrowers (88%) didn\u2019t make payments during the pandemic forbearance. If you\u2019re one of these borrowers, here are five steps to prepare for repayment.<\/p>\n

\n

1. Know your details<\/strong><\/h2>\n

According to the survey, nearly half of federal student loan borrowers (46%) don\u2019t know how much student loan debt they currently have, and 57% don\u2019t know who their loan servicer is. Close to a third of federal student loan borrowers (31%) aren\u2019t sure what their interest rates will be when forbearance ends, and 27% aren\u2019t sure how to make payments at that time.<\/p>\n

If you don\u2019t know who your student loan servicer is, log in to the\u00a0Federal Student Aid website\u00a0using your FSA ID (you can create one if you don\u2019t yet have one). On the left, you\u2019ll see your total balance, and on the right, your loan servicer(s). You can make payments on your loan servicer\u2019s website, as well as find interest rate information. Because of the payment pause, interest rates might only appear as 0%, but your issuer website(s) should tell you when loans were disbursed, and you can look up the\u00a0rates on the FSA site\u00a0by disbursement date(s).<\/p>\n

2. Decide on a payment plan<\/strong><\/h2>\n

The standard repayment plan is 10 years, and if you can afford the payments, this is probably the best choice to minimize interest costs. However, there are\u00a0other repayment plans\u00a0that can lower your monthly amount owed. The survey found that 60% of federal student loan borrowers don\u2019t know what options they have for payment programs.<\/p>\n

For many, an income-driven repayment plan will be a good choice to lower your monthly cost by capping payments at a percentage of your discretionary income and forgiving the remainder after 20 or 25 years of payments. The Biden administration is also rolling out the SAVE plan to make payments even lower and forgive balances sooner for students with an original student loan debt of $12,000 or less.<\/p>\n

If you do opt for an income-driven plan, understand that any amount forgiven at the end of repayment may be subject to taxation.<\/p>\n

Learn more:<\/strong> Student-loan interest is resuming. Here\u2019s why the government charges it.<\/p>\n

3. Review your budget<\/strong><\/h2>\n

According to the survey, nearly 2 in 5 federal student loan borrowers (38%) say they\u2019ll need to significantly change their budget in order to afford student loan payments once forbearance ends. Look through your current budget and see where extras can be cut in order to make your payment. For a good starting point, you can see how your current spending aligns with the\u00a050\/30\/20 budget, which recommends spending 50% of your income on needs, 30% on wants and 20% on debt payments and savings.<\/p>\n

If there aren\u2019t extras to be cut, even after lowering your payment through an income-driven repayment plan, you might choose to not make payments for up to a year. The Biden administration has instituted a 12-month onramp period, meaning you won\u2019t be penalized for not making payments. But there are drawbacks to taking this route.<\/p>\n

Also see:<\/strong> How to sign up for SAVE, the student-loan repayment plan Biden officials are calling a \u2018game changer\u2019<\/p>\n

4. Understand the downside of not making payments<\/strong><\/h2>\n

With the onramp period, you can choose not to make payments to your federal student loans without going into default, so your credit won\u2019t take a hit if you can\u2019t pay. However, interest will continue to accrue, so you\u2019ll find yourself in more debt by the end of the 12-month period. Also, this is only a temporary solution, and after a year, you\u2019ll have to make payments again or risk default.<\/p>\n

So yes, you can miss payments for that 12-month period, if necessary. But if you can reasonably find a way to pay, it\u2019s a good idea to do so.<\/p>\n

Plus<\/strong>: Biden administration to cancel $72 million in student debt for borrowers who say their school scammed them<\/p>\n

5. Set up autopay<\/strong><\/h2>\n

For direct federal student loans, you can get a small interest rate break \u2014 a reduction of 0.25 percentage point \u2014 by setting up automatic payments. This isn\u2019t going to make your loans significantly more affordable, but if you know you\u2019ll have adequate funds available in your bank account in time for each due date, it will save you some money and also ensures you won\u2019t miss any payments.<\/p>\n

More From NerdWallet<\/strong><\/p>\n

Erin El Issa writes for NerdWallet. Email: erin@nerdwallet.com.<\/em><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

This article is reprinted by permission from NerdWallet.\u00a0 Federal student loan repayment resumes in the coming months \u2014 interest begins accruing in September, with payments starting in October \u2014 after a 3\u00bd-year payment pause. According to a\u00a0new NerdWallet survey, most federal student loan borrowers (88%) didn\u2019t make payments during the pandemic forbearance. If you\u2019re one […]<\/p>\n","protected":false},"author":1,"featured_media":58382,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-58381","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nHow to prepare your finances for restarting student loan payments | iFintechWorld<\/title>\n<meta name=\"description\" content=\"This article is reprinted by permission from NerdWallet.\u00a0 Federal student loan repayment resumes in the coming months \u2014 interest begins accruing in\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=58381\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" 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