How to Prepare for Student Loan Payments to Resume

When Do Student Loan Payments Resume?

The student loan payment pause has been extended eight times since it was first introduced. With the recent debt ceiling deal, Democrats and Republicans agreed that the administration would not seek to extend the student loan payment moratorium again.

As a result, interest will start accruing again on federal loans on September 1 and payments will resume on October 1 (borrower due dates may vary).

Additionally, the Supreme Court struck down the Biden administration’s widespread student loan forgiveness program. Borrowers who were hoping to receive full or partial forgiveness of their debt will need to prepare to start making payments again. The administration is providing a 12-month “onramp” period to allow borrowers to begin repayment while avoiding loan delinquencies or defaults. Still, interest will accrue during the transition period, so it will benefit borrowers to begin making regular payments in October if they’re able.

How to Prepare for Student Loan Repayment

Depending on your situation and budget, there may be several ways you can approach paying down your student loans. Here are some ways you can start thinking about preparing for student loan payments to start up again.

Make a Budget

If you don’t already have a budget in place, now may be a good time to start using one. A budget is a simple way to help you understand exactly where all of your money is going.

To make a budget, start by writing down your income and expenses from the past few months to get an idea of where your money is coming from and where it’s going. Depending on your comfort level, break out your expenses into different categories—the more categories you have, the easier it will be to make decisions about how to allocate your spending. To get started, you can use a budgeting app, your own spreadsheet or whatever works best for you.

With that information in mind, you can start planning how you want to spend your money for the upcoming month, including your student loan payment. Check with your loan servicer to confirm your payment amount in advance, as it’s possible it may have changed.

Once student loan payments start up again, your budget will help you make sure you have enough cash flow for that expense, along with all of your other ones.

Cut Costs

It’s been a long time since student loan payments were required, and your budget may have changed significantly since then. If you’ve started using the money that would have otherwise gone to student loan payments for other purposes, you may have to cut back in certain areas of your budget.

If you’ve improved your financial footing, however, you could consider putting more toward your student loans than is required. Even a little extra every month can shave off months of repayment and hundreds or even thousands of dollars in interest.

As you look for areas to cut back, be honest with yourself but also reasonable, so you can achieve your debt payoff goals while also being able to pay your other bills on time.

Earn More Income

If you have the time, you may also look into opportunities to earn more income. This may include working overtime at your current job, taking on a second, part-time job or starting a side hustle.

If you’re thinking about getting a side hustle, opportunities are plentiful, so do some research based on what you enjoy doing or what you’re good at to find the right fit.

Some common side hustle options include:

• Driving for Uber or Lyft
• Delivering food or groceries for apps like DoorDash and Instacart
• Buying and selling used items online
• Renting a room on a short-term rental website
• Performing odd jobs on Craigslist, Mechanical Turk or Thumbtack
• Tutoring young students
• Becoming a mystery shopper
• Walking dogs

Take some time to consider several options, including the time requirement, flexibility and pay, to find the best one for you.

What to Do if You Can’t Afford Your Student Loan Payments

If you believe you might still have trouble paying your student loans once the federal student loan payment pause ends, here are some potential solutions:

• Request forbearance or deferment. The federal government offers forbearance and deferment for people experiencing financial difficulties. Your options may depend on your situation, so contact your student loan servicer directly for more information.
• Get on an income-driven repayment plan. The Department of Education offers four different income-driven repayment plans, all of which can reduce your monthly payment to 10% to 20% of your discretionary income. That way, you don’t have to worry about the end of a forbearance plan creeping up on you and being right back where you started. Income-driven repayment plans also extend your repayment plan up to 20 or 25 years, after which any remaining balance is forgiven.

These options can provide immediate relief and potentially help you get to where you need to be financially to continue paying down your student loan debt.

Student loan refinancing can be another way to reduce your monthly payments, but private lenders typically don’t offer income-driven repayment plans, and their forbearance options are often less generous than what the federal government provides.

Monitor Your Credit as You Pay Down Your Debt

As you think about beginning repayment on your student loan debt again, it’s also important to keep track of your credit score and credit reports.

With Experian’s free credit monitoring service, you’ll be able to keep track of your FICO Score and regularly review your Experian credit report to understand what impacts your score and to address issues as they come up.

You’ll also get real-time alerts when changes are made to your credit report, such as a new account or inquiry. As you monitor your credit, you’ll be better positioned to build a strong credit history and prevent potential negative items from doing damage to your credit score.