Federal student loan payments have been on pause for borrowers in the U.S. since March 2020. Barring any last-minute extensions, that temporary student loan forbearance period is scheduled to end on May 1, 2022 (announced on Wednesday, December 22, 2021). If you have federal student loans, it is wise to start preparing for them to resume shortly.
Paying off your student loans can be an overwhelming endeavor, no matter the time. Before the federal student loan forbearance period ends, you may want to reexamine your current student loans and review your plan to pay them to ensure it still reflects your specific situation. If you don’t have a plan, it is not too late to create one to knock out your loans.
It is possible that your monthly income and expenses may have changed since you last made payments on your federal student loans. Before forbearance ends, it is essential to understand where you stand financially. Take a look at your spending habits and where the money from each paycheck is going. Then determine where your student loan payments fit within your budget and if anything needs to change.
As we approach the end of federal student loan forbearance and no new student loan relief measures are put in place, borrowers will begin to receive notices from their federal student loan servicers. Make sure to read them, as they may have critical information and updates regarding the dates that loan payments will resume and include details on the federal government’s loan repayment plans.
Depending on what data the loan servicers have, they may try to reach you by email, phone, or mail. So, you will want to check to see if your contact information is up to date.
If you have been keeping up with the news, you may have heard a lot of discussion around the future of student debt. As of December 22, 2021, President Biden extended federal student loan forbearance through May 1, 2022. Paying attention to breaking news about federal student loans can help inform your decisions.
Federal student loans have several income-driven repayment plans that base your monthly payment on your income. Most federal student loans are eligible for at least one of the following: Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Eligibility is dependent on your type of loan and your current financial circumstances.
It may be a good time to look into refinancing your student loans. It could benefit you financially, helping you save money during the length of your repayment with a decreased interest rate or decrease your monthly payment amount.
Making any changes to your current situation requires careful consideration to ensure refinancing your student loans is the right fit for you. Remember, if you have federal student loans and decide to refinance them with a private lender, you will lose federal benefits, including access to income-driven repayment plans and eligibility for loan forgiveness. However, based on your options, low-interest rates can help your quality for some savings.
For some, this is easier said than done and may not work for you if you are already enrolled in an income-driven repayment plan. Still, if you can pay a little extra towards the principal each month, it may benefit you in the long run in terms of paying off your loan a little more quickly.
Signing up for a student loan consultation with a student loan specialist at Spaugh Dameron Tenny can help you navigate your federal student loans and see how you can pay them off with confidence.
While federal student loan payments, interest accumulation, and collection activities are still paused, there are several smart money moves you can make with your regular student loan “budget.”
Although federal student loans are still under forbearance until May 1, 2022, they are not going away any time soon. Understanding what you owe and your payment options can help you create a plan to handle your debt when federal relief ends.
Our student loan specialists are always happy to schedule a time to talk through your options.
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Will Koster is a financial planner with Spaugh Dameron Tenny. The experience of losing his father as a teenager helped Will find his calling in financial planning. He has a passion for working with dentists and physicians, helping them navigate their unique wealth creation journeys. In addition, Will has become the in-house expert on student loans after completing the Certified Student Loan Professional® training.
