When the federal student loan relief program began in March 2020, it meant a temporary interest freeze for almost 40 million borrowers of federal student loans and a collections halt for federal loans in default.
The repayment clock is set to start again 60 days after either the Education Department is allowed to implement the President’s one-time debt cancellation or the litigation is resolved, or 60 days after June 30, 2023, whichever comes first.
Now it’s time to take steps for when the relief programs ends and borrowers should be ready to begin making student loan payments. Here are some ways to prepare for repayment.
Update Your Contact Info
Make sure your contact information is up to date in your profile on your loan servicer’s website and in your StudentAid.gov profile. Wrong contact information could make you miss important updates.
Take Inventory
Take the time to document how much you owe and who to contact about student loan balances. To get current loan balances, log onto the National Student Loan Data System (NSLDS). The portal will display:
- How much you borrowed
- Each type of loan and interest rate
- Payment history
- The current loan servicer for each loan
For private student loan information, check with your credit report, which tracks current and past credit obligations, including student loans. AnnualCreditReport.com provides borrowers with a free report from the three main credit reporting agencies: Equifax, Experian, and TransUnion.
Look At Affordability of Payments
Look at where you are now compared to when payments were stopped. Take into consideration your current monthly income and expenses. You might find that resuming payments for federal student loans will strain your budget.
Explore options to lower monthly payments like switching to an income-driven repayment plan. Private student loan lenders typically don't offer income-driven plans, but they might offer alternative repayment plans on a case-by-case basis.
Understand what happens if you don’t repay your loan.
If you miss a payment, your loan becomes delinquent.
- Delinquent for 90 days or more, your loan servicer will report it to the three major national credit bureaus.
- Delinquency will affect your credit score, making it harder to get credit.
- After 270 days, your delinquent loan goes into default.
When you default on a loan:
- You can lose your access to more student aid.
- The default status will damage your credit score.
- To pay off your defaulted loan the government can take:
- Your tax refund
- Part of your social security benefits
- Up to 15% of your paycheck
So be sure to resume making your student loan payments once the Federal student loan relief ends.
With a little planning now, you can feel better as you move ahead with your monthly federal student loan payments. Get help with Credit union of Denver’s student loan resources through Smart Stuff Enrich. Try the Student Loan Snapshot to borrow smarter, track all of your student loans, and compare repayment options.