What should you do to prepare to make payments again? Here are five things to do before student loan payments resume, according to financial experts.
Review your current loans and make certain your information is correct.
Do you know the details of what you owe and to whom? Gathering information about your current loans will help you decide on a potential budget and game plan to chip away at your loans.
Finance coach Raya Reaves recommends finding out exactly what you owe. Ask the following questions: “Do you have private loans, federal loans or both? Do you know all of your loan servicers, and if they are different from the lenders? What is your total balance due and what is your interest rate?”
Annie Hanson, finance coach, suggests borrowers log into their accounts at studentaid.gov to make sure their information is correct. During the pandemic, you may have moved, changed jobs, or had other life changes and may have forgotten to update your student loans. Studentaid.gov will also give you a list of your student loans and student loan servicers. “This is important because your student loan servicer may have changed recently,” says Hanson.
Understand your budget goals.
Reviewing your budget ahead of time will help you understand where you need to save to account for your student loan payments.
According to Reaves, consider the following options if adding student loan payments will leave you with a negative balance: “Reduce your spending in other areas. You can do this by cutting back amounts allotted for discretionary and variable categories. You can also pause or temporarily terminate some bills to help you break even or increase the amount of income you make. Can you work overtime at your job to bring more money in? Can you get a part-time job or side hustle? Extra money can help you reduce your monthly deficit and leave you with extra money to save or put toward student loan payments.”
Being informed about your budget will help you understand if you can afford the additional student loan payments or not. “When you know that information, you can proactively work to prepare your finances for the new expense,” adds Reaves.
Seek employers who have student loan repayment programs.
As a perk, many companies are including student loan repayment programs in their compensation packages. With additional help from your workplace, you can pay off your loan faster. “Employers are looking for ways to improve job satisfaction to avoid employee turnover and are also looking for ways to differentiate themselves in a competitive job market. A benefit like this can improve employee engagement, productivity, and loyalty and can help employees have greater success with saving for retirement and other long-term goals like a home purchase,” says Patricia Roberts, the chief operating officer of Gift of College.
Consider refinancing your student loans.
If you have several loans with high interest rates, you may want to consider refinancing these loans with a private lender. There are pros and cons to this approach. “Although you can sometimes get a lower interest rate by refinancing, doing so means that you lose access to federal programs such as income-driven repayment and loan forgiveness programs. A financial planner or student loan expert can help you understand the ramifications and choose the best option for you,” says Hansen.
If you can, start paying early.
According to Connor Brown, founder of After School Finance, if you have the means to make payments now, don’t wait.
“If you wait for the payments to continue, it will take you a long time to finish your loan. There won’t be much difference if you wait for the payment to resume or pay it now,” says Brown.