Borrowers of federal student loans have had 0% interest rates and payments paused since March 13, 2020. However, interest will resume accruing on Friday, ahead of payments that will restart in October.
What you need to know before the restarting of student loan interest on Friday (Photo: Philadelphia Fed)
Along with figuring out your new payment schedule and repayment options, you may have a new student loan servicer who is difficult to reach. Here are some things you should take right now to better prepare for the return of interest and payments.
According to GO Banking Rates, the first thing you should do before the restarting of student loan interest is contact your loan servicer as soon as possible. This allows you to review your account details and obtain help before potentially long wait periods. If you don’t know who your servicer is, you can check it up on StudentAid.gov under “My Loan Servicers.” You should also get a letter or email identifying the servicer before the restarting of student loan interest.
Prior to the restarting of student loan interest, you need to reconsider your repayment plan. If your payments are overly expensive, you should consider other income-based repayment options, which could reduce them and potentially lead to loan forgiveness. The Saving on a Valuable Education (SAVE) payment plan, which replaces the Revised Pay as You Earn (REPAYE) plan, is a new alternative.
The minimum adjusted gross income (AGI) required to make any payments under this plan is 225% of the federal poverty level. While your payments will initially be capped at 10% of your AGI, you will begin paying a lower 5% toward undergraduate debt in July 2024.
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Although the federal payment pause has come to an end, student loan deferment and forbearance are still options through your loan servicer.
According to Yahoo Finance, one of the things that you need to do before the restarting of the student loan interest is to explore options for further pausing payments. You may be eligible for a deferment or forbearance if you are experiencing significant financial hardship, serving in the military, or working as a healthcare resident or intern. Deferment is also feasible if you are enrolled in at least half-time at an eligible school. You must contact your loan servicer to learn about the acceptable reasons for deferment or forbearance, as well as the application and documentation requirements.
You must also begin planning to pay before the restarting of student loan. You should make a note of your next student loan payment date and examine any autopay settings to avoid missing a payment. You should then examine your budget and eliminate any needless purchases so that you can begin saving for your payments. It may also be worthwhile to investigate additional income options for further financial security.
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