Student loan repayment protections will end on May 1, 2022. Here’s what you can do now to get ahead of your student loan payments.
No time to read now? Pin this article for later.
By now everyone knows that federal student loan payments will resume in May of this year. This means anyone with a U.S. federal loan for college or university studies will have to start making payments again. Despite the public outrage about the student debt crisis, the White House announced that it’s sticking to this plan. So, if you haven’t already made one, now is the time to come up with a plan of your own.
Use these 4 easy steps to help you get your loans under control. Even if you can’t get rid of them completely, you’ll be taking steps in the right direction.
Make Sure Your Information Is Up To Date
It’s important to check the details of your loans. Two years may seem like a short time frame, but a lot of things might have happened in your life.
For example, did you change jobs or move? This matters because your lender will want to get in contact with you soon – via email or mail. Remember to confirm your contact information is up to date.
Review the Terms of Your Student Loans
Has anything happened that is now impacting your ability to repay your loans? For example, did your income or financial responsibilities change during the pandemic?
Use this time to see if you can refinance to a lower interest rate, which would lower your monthly payment. Also, see if you’ll qualify for an income-based repayment plan.
Start gathering your paperwork now. Experts suggest getting a jump on the paperwork needed to request deferments and refinancing.
Also, don’t forget to see what repayment benefits your employer offers employees.
Lastly, some lenders recently opted to end their contract with the U.S. Department of Education, so your current loan servicer may be different from the one you had before the pandemic. Check www.studentaid.gov to learn more about your options.
Include Your Loan Payment In Your Budget
The pandemic may have forced you to make some lifestyle changes that affected your finances. Depending on your resources and attitude towards money, you may have accumulated a lot of savings or acquired more debt. Either way, those student loan payments are coming back and they’ll need a line item in your household budget.
If you have a cushion, consider how you will use it to pay down monthly payments. If you don’t have any excess cash flow, think about the ways you’ll generate the income for your payments. This could mean opening an online store, taking on new gigs, working overtime, or asking for help from your employer.
If multiple people in your home have loans, consider these tactics holistically. If two spouses are saddled with debt, perhaps both can work together to make accelerated payments. And if parents have multiple adult kids trying to stay afloat, maybe now is the time to ask if they’d like to move back home.
Either way, working out the numbers now is an important part of staying ahead of payments later. Build these support systems and establish multiple streams of income, which can truly help put a dent in student loan debt.
Start Paying Your Student Loans Now
If you’re among the lucky ones who have squirreled away cash or who received a huge bonus, now is the time to give yourself the gift of debt freedom. Until May 1, these debts are 0%, which means that whatever you pay now will reduce your principal and lower the amount of interest payments in the future. Sure, most people would want to wait until the grace period is over, but if you have the money now – why wait?
It is to your advantage to pay off the loan completely before your lenders come knocking. This could be small payments of just $20, but every little bit counts. It is not uncommon for graduates to have runaway student debts. This means no matter how much they pay the total amount of the debt never goes down because the interest is too high. Until the end of April, that can’t happen. This is a perfect time to rob your lender of the opportunity to make money off of you. Pay something now and save big later.
To keep the flow going in the direction of better financial health, check out this article on 8 Wealth Management Tips or Millenials.
Final Thoughts
While it might seem like the perfect time to watch and wait, that’s not the ideal approach to tackling debt. Urgent action is needed to trim spending and to accelerate paying off debt. When it comes to student loans, your student loan debt is no exception.
To make progress on debt repayments, get reacquainted with the terms of the loan and decide if you have the means to fulfill your side of the bargain. If you’ve lost the income or financial discipline to take on one more bill, then craft a strategy for how you’ll get back on track.
Call your lender now and learn more about the options. Talk to your employer, which may have more assistance programs today than it did two years ago. Also, consider the ways that you can earn more – a side hustle, gigs, and freelancing. Or ask for the long-overdue promotion. Lastly, seek help from friends and family. Most importantly, remember that the time to start isn’t May 1st. The time to start is right now.
Want more information to grow your financial literacy? Read “Insane Books That Will Change Your Finances.”