Student Loan Repayment Pause is Ending: 8 Things to Do

When Interest Will Start Accruing After The Student Loan Payment Pause Ends?

student loansThe student loan pause is scheduled to end 60 days after June 30. That would be August 29. Since March 2020, interest rates have been set at zero percent for all government-held federal student loans. But after August 29, 2023 interest will start accruing again.

The end of the payment pause comes after the Supreme Court shut down the Biden Administration’s plan to forgive up to $20,000 for some of the 43 million Americans who borrowed to attend college and still owe.

When your student loan repayment is ending, there are several important steps you should take to ensure a smooth transition and manage your finances effectively. Here’s a comprehensive guide on what to do:

  1. Contact your Loan Service or Lender: Confirm the exact date when your student loan repayment will end and learn more about the outstanding balance. During the forbearance period, several federal student loan servicers consolidated with other companies, so loans for many borrowers may be managed by a different servicer than when they last paid. If you are unsure who your servicer is now – and they may have more than one – you can find that information by logging in to the Federal Student Aid website. You should then log in to their account with their servicer and confirm the accuracy of your contact information. You should contact your loan service or lender with questions sooner rather than later and make any necessary changes to your repayment plan.
  2. Create a Budget: Assess your financial situation and create a post-loan repayment budget. Factor in your monthly income, expenses, and financial goals. After identifying fixed expenses on necessary things like rent or mortgage payments, insurance and car payments, along with variable expenses on other essentials like gas, groceries and even entertainment, identify discretionary income that’s used on nonessential purchases that can possibly be cut.
  3. Emergency Fund: Consider building an emergency fund with enough savings to cover three to six months’ worth of living expenses. Put aside money just in case something happens like COVID, you get laid off, you have an illness or you have an auto repair that’s not covered by a warranty.
  4. Explore Loan Forgiveness Programs: If you work in a qualifying government or non-profit organization job and have federal student loans, you may be eligible for loan forgiveness programs. Research and determine if you qualify for any forgiveness options based on your profession or loan type. To see if an employer meets the qualifications, use the PSLF Help Tool  on the FSA website
  5. Income-driven repayment plan: An income-driven repayment plan sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size. It takes into account different expenses in your budget, and most federal student loans are eligible for at least one of these types of plans. Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. If your income is low enough, your payment could be as low as $0 per month. If you’d like to repay your federal student loans under an income-driven plan, the first step is to fill out an application through the Federal Student Aid website.
  6. Assess Other Debts: If you have other outstanding debts (e.g., credit card debt, personal loans), create a plan to pay them off strategically. Focus on high-interest debts first while making minimum payments on other obligations.
  7. Invest and Save: Consider investing or saving any surplus funds after covering essential expenses. Look into retirement accounts, such as a 401(k) or IRA, to secure your financial future. Keep yourself updated on financial literacy, investment opportunities, and money management strategies. Understanding personal finance can help you make informed decisions and build wealth over time.
  8. Save Repayment Plan: Following the Supreme Court ruling, the Education Department also announced the creation of the Saving on a Valuable Education Plan, which will go into effect later in the summer of 2023. This income-driven repayment plan will cut monthly payments to $0 for millions of borrowers making $32,800 or less, or $67,500 for a family of four, though those amounts are higher in Alaska and Hawaii. Borrowers who earn more than those amounts may still see $1,000 per year in savings on their payments, according to the Education Department. The plan also seeks to stop interest charges that can leave borrowers owing more than their initial loan. For undergraduate loans, the plan will raise the amount of income that is considered discretionary income and will cut monthly payments from 10% of discretionary income to 5%. For borrowers with original loan balances of $12,000 or less, the plan will forgive loan balances after 10 years of payments instead of 20 years. All student borrowers in repayment will be eligible to enroll in the SAVE plan before month payments are due. Borrowers who sign up or are already signed up for the current Revised Pay as You Earn plan will be automatically enrolled in SAVE once the new plan is implemented, the White House announced. More information about the plan and its eligibility can be found on the FSA website. 

Don’t forget to apply to scholarships!

Even if you don’t have a lot of time, at IOScholarships there are scholarships that take minutes to apply for! Start with our 15 top STEM scholarships showcasing an opportunity for everyone! You can also try out our free scholarship organizer which helps you stay organized in your scholarship search.

Remember that successfully managing your finances is an ongoing process. Be disciplined with your spending, save and invest wisely, and prioritize financial security as you move forward after student loan repayment. By paying off your student loans early, you can save a significant amount of money on interest over the life of the loan, and this can provide a financial freedom to allocate money towards other financial goals such as saving for a down payment on a house, starting a business or investing for the future. By paying off the loans sooner, you can reduce the overall amount of interest that accrues over the loan term, potentially saving thousands of dollars in the long run.

Please note that the information contained on this website shall not be understood or construed as financial advice. If you’re unsure about financial planning or investment strategies, consider consulting a financial advisor. They can offer personalized advice based on your specific situation and goals.

Student Loan Payment Pause Is Ending: 8 Things to Do