Before you resume and make your first student loan payment, there are a few things to consider to add your debt payments to your monthly budget.
As of January 1, 2023, millions of people with federal student loans will have to resume their debt payments if they have not done so for more than two years, due to the leniency approved on several occasions since March 2020 due to the coronavirus pandemic. Covid-19. Although two months seems like a short time to add an extra expense that you are used to not covering, it is time for you to prepare to budget for it.
Although the covid-19 pandemic has already subsided a bit in the United States and many of the productive activities have already been reintegrated almost 100%, inflation has become the challenge of 2022. The high prices of goods and services make Budgets get tighter.
One of the benefits of student loan repayment is that you already know in advance when you need to add this old payment to your current budget. In other words, from now on you can plan the corresponding financial steps for when you have to pay between $150 and $300 extra dollars.
What can you do to prepare? Here are some important points:
1. Do not trust that they will extend the leniency
In late August, President Joe Biden announced two major programs for people with student loans: forgiveness and extended forbearance. From that moment, the president assured that this would be the last occasion in which he would extend the temporary forgiveness of payments. Yet last March, when he once again extended the leniency, he said the same thing.
It is possible that after the setback from the US Court of Appeals for the Eighth Circuit in St. Louis that temporarily prevents the Department of Education from processing debt relief, the Biden administration will contemplate a new extension of not being able to comply with the promised forgiveness of $10,000 and $20,000. Opponents say President Joe Biden doesn’t have the authority to forgive federal student loans because Congress didn’t authorize the massive debt relief program.
2. What to do before resuming your payments
The Department of Education suggests that before making any first payment, borrowers review important information about their loan. In more than two years, there have been many changes, such as the disappearance of certain loan servicers. That is why the government agency recommends:
1. Update your contact information in your profile on your loan servicer’s website and in your StudentAid.gov profile.
2. Review auto debit enrollment or sign up for the first time by logging into your loan servicer’s website or contacting your loan servicer directly.
3. Check out Loan Simulator to find a payment plan that meets your needs and goals or to decide whether to consolidate.
These types of steps will ensure you where to direct your payments and if you can even reduce them.
3. Look for payment reduction options
While Biden’s forgiveness announced in August is extraordinary and is being held on hold by the appeals court, it’s not the only option borrowers have to lower their monthly payments now that they resume. Some workers may qualify for payment plans based on income.
Borrowers will be required to provide information about their income and family size as part of an application for an income-driven repayment plan. If your income is less than 150% of the poverty line, they could even receive a zero monthly payment, which would seem like a further extension of the forbearance. This does not mean that your loan is forgiven, only that the resumption of your payment is deferred.