Student loan payments are about to resume for the first time in over three years. In March 2020, the government implemented a pause on student loan payments – including interest accrual – due to the COVID-19 pandemic. After this pause was extended several times by both Presidents Trump and Biden, Congress recently prohibited an additional extension. As a result, over 44 million borrowers will soon be required to make their student loan payments once again. Here’s what you need to know as payments restart.
You’ll start accruing interest on your student loans on September 1, 2023. You should expect your interest rate to return to what it was prior to the freeze in March 2020. While interest is already accruing again, you won’t need to take any action until the first payment is due.
Most people will have their first student loan payment due in October 2023. You should expect to receive a bill detailing the amount you owe and the due date at least 21 days prior to when payment is due. However, it’s still a good idea to contact your lender to ensure you know exactly when your first payment must be made.
If you graduated last spring, you may still be within the grace period. Borrowers typically won’t have to make any payments until the grace period expires, which is generally six to nine months after graduation.
In most instances, you can expect your monthly payments to be the same as before the pandemic. Some factors which may cause your monthly payment to have changed include:
Individuals with income-driven repayment plans weren’t required to provide income information during the student loan payment freeze, and the earliest they will need to begin providing proof of income again will be March 2024. However, if you’ve experienced a decrease in your income or an increase in your family size since the last time you submitted this information to the Department of Education, you may want to start providing updated information right away since you may qualify for a reduced monthly payment under those circumstances.
There are a few options available to borrowers who are struggling financially:
You can see if you qualify for a deferment to prevent your loan payments from resuming right away. The deferment you may qualify for will depend on your specific circumstances:
Keep in mind that while you won’t have to make a payment while your loans are deferred, you also won’t be making any progress toward paying back your loan. If you’re struggling to pay your bills right now and qualify for one of these deferments, then it may be the right decision.
However, it will also mean that your loans will take longer to pay off. If you have subsidized loans, you most likely won’t accrue interest during an unemployment or hardship deferment. However, unsubsidized loans will continue to accrue interest during the deferment period.
If you don’t qualify for one of these deferments, you can apply for an income-driven repayment plan that could lower your monthly payments. Income-driven repayment plans use your income and family size to determine the amount of your monthly payments rather than using the amount of debt or your interest rate to calculate the amount you owe each month.
Keep in mind that while an income-driven repayment plan will lower your monthly payments, it may increase the total amount of money you pay over the lifetime of the loan since it will take longer to pay off your loan and as a result, you may accrue more interest.
The Department of Education recently implemented their new Saving on a Valuable Education (SAVE) plan. This plan is discharging more than $116.6 billion in student loans for eligible borrowers. The SAVE program may help you have some or all of your remaining student loan debt forgiven if:
In addition, you may be eligible for student loan forgiveness if you meet one of the following criteria:
You can apply for these programs online.
If you’re not eligible for a deferment, income-driven repayment plan or student loan forgiveness, there may be other ways you can get creative to alleviate some of the financial strain caused when student loan payments resume in October. If you’re still paying off your vehicle, then refinancing your car loan can potentially help you free up some cash in your monthly budget to offset the money you will now have to put towards student loan payments.
At iLending, our You First Approach™ makes car loan refinance easy and hassle free. You’ll work directly with one of our loan consultants who will listen carefully to your goals for the refinance process. Your loan consultant will then compare loans across our extensive network of over 50 nationwide lenders to identify the best options that align with your specific goals. After reviewing your options with you and giving you a chance to ask questions, your loan consultant will recommend the best loan for your needs.
Once you’ve chosen a loan, our team will take care of all the work for you. We’ll fill out all the paperwork and follow up with your existing lender to ensure your current loan is paid off correctly. This provides a truly easy and hassle-free process, giving you peace of mind that you’ve received the best possible loan option.
On average, iLending customers save $133 per month when they refinance with us. While this may not cover your entire monthly student loan payment, it can offset a significant portion of the money you’ll now be spending on this expense, making it easier to keep up with the rest of your bills.
Apply now to get the car loan refinance process started.