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How to Prepare for Student Loan Payments to Begin October 2023

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Listen to the Podcast Here: 13. How to Prepare for Student Loan Payments to Begin October 2023

The Federal student loan payment pause, which started March 13, 2020 in response to the COVID-19 pandemic, ends August 31, 2023. The pause suspended Federal student loan payments and interest accrual on those loans. While forbearance of payments will continue through September 2023, with payments due beginning October 2023, interest will begin accruing on Federal student loans on September 1.

You can choose to begin making payments before October 2023, if you would like to. Your student loan servicer is required to notify you of your payment amount and payment due date at least 21 days before it is due.

Instead of waiting to see what happens and for your student loans servicer to tell you when your payment is due and how much you owe each month, here are 7 things you should do now to prepare for student loan payments to restart in October 2023.

1. Identify Your Student Loan Servicer

I have found that a lot of people don’t know who their student loan servicer is, how much outstanding student loans they have, or what their payments will be when they resume in October. Also, your student loan servicer may have changed since you last had to make a payment.

If you don’t know who your loan servicer is, you can create a login at the Federal Student Aid website at  https://studentaid.gov/. Once you have logged in and gone to your dashboard, you will see a section on the right side that says “My Loan Servicers” with a link to your student loan servicer’s website.

If you have not done so already, then you should create your login for your student loan servicer’s website as well. Your loan servicers website will be where you make payments and it will also have all of the details of your student loans.

2. Verify Your Student Loan Information

When you have created your login for your student loan servicer’s website, you can verify your student loan information. You will want to be sure that you understand all of the loan amounts that you have outstanding, the interest rates on those loans, and the payment amount due.

For example, if your student loan servicer is Nelnet, when you login there will be a section in the middle of your dashboard titled “Payments” that shows your payment amount due, your next auto debit amount (if you’re enrolled in automatic payments), and the date the payment will be made.

To find the details of your loans in Nelnet, you can click the “My Loans” tab which will show you each group of student loans including the type of loan, repayment plan, due date, interest rate, and balance of the loan.

It’s also important to make sure that your contact information is updated so that you receive notifications going forward and you don’t miss out on anything important.

(Keep in mind that this may be different for other student loan servicers – Nelnet is the one that I am most familiar with.)

3. Determine if You’re on the Right Student Loan Repayment Plan

If you have never taken action on your student loans, then you may be defaulted into the Standard Repayment Plan, which will have you pay off your student loans over 10 years if you have not consolidated them.

If you are working towards Public Service Loan Forgiveness (PSLF), another form of student loan forgiveness, or you find that your payment due under the Standard Repayment Plan is not feasible for you, then you may need to select a different repayment plan.

Federal Student Aid’s Loan Simulator tool can help you calculate what your payments would be under each available repayment plan and can help you choose a different plan or consolidate your loans, if you believe that’s the best option for you.

(Please note that I have read from a student loan expert that the Federal Student Aid Loan Simulator may not currently be working properly. Student Loan Planner, which is a student loan consulting company, has many student loan calculators on their website that you may want to compare against the Federal Student Aid Loan Simulator to confirm results.)

There are a lot of different student loan repayment plans available. If you’re unsure about which one is appropriate for your situation, you should consider consulting with a student loan professional.

As an example, here are all of the repayment plans currently available: Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, SAVE Plan (formerly REPAYE Plan), PAYE Plan, Income-Based Repayment Plan (IBR), and Income-Contingent Repayment Plan (ICR).

That’s 7 different repayment plans to choose from.

4. Determine if You Should Refinance Your Student Loans

If you are not working towards student loan forgiveness under PSLF, an IDR plan, or another program, then you may want to consider if it makes sense to refinance your student loans.

When you refinance your student loans, you take out a new loan from a private lender to pay off your current Federal student loans. Generally, if you cannot obtain an interest rate from a private lender that is lower than the interest rate of your Federal student loans, then it may not make sense to refinance.

As a general rule of thumb, student loan experts often say that if your student loan balance is less than your income, you should look into refinancing if you can lower your interest rate. On the other hand, the rule of thumb is that if your student loan balance is more than your income, it may make more sense to look into an Income-Driven Repayment (IDR) plan such as such as the SAVE Plan or PAYE Plan.

Of course, a rule of thumb should not be mistaken for specific financial advice or for something that is right for everyone. Everyone’s situation is different and there are drawbacks to refinancing student loans.

When you refinance your student loans from Federal loans to a private loan, you lose benefits of Federal student loans such as potential forgiveness under PSLF and IDR plans, flexible repayment plans based on income and family size, and the benefits that many have benefited from over the past 3 years including forbearance due to the COVID-19 pandemic.

It doesn’t make sense to refinance away from Federal student loans and give up these benefits if you are not going to significantly lower your interest rate by doing so.

5. Submit An Updated PSLF Certification Form

If you’re pursuing Public Service Loan Forgiveness (PSLF), you may want to consider submitting an updated Public Service Loan Forgiveness (PSLF) Certification form to the Department of Education.

According to the Federal Student Aid website you should “Certify your employment every year and any time you change employers. This lets you confirm you’re on track toward forgiveness.”

6. Setup Auto Pay

If you were enrolled in autopay prior to the student loan pause, don’t assume that it will automatically restart. It’s important to login to your student loan servicer and make sure that you setup auto pay so that you don’t accidentally miss a payment.

Also, setting up auto pay on your student loans provides a discount on your interest rate of 0.25%.

7. Revisit Your Budget

Without having had to make student loan payments in over 3 years, I’m afraid that many people let those funds get absorbed in their day-to-day spending. This means it’s going to be really important for a lot of people to revisit their spending and see where they can cut back to accommodate student loan payments.

Do this now before your student loan payments come due and you have to scramble to figure out how to make those payments.

Don’t Wait

If this all seems too confusing and you need help, please don’t push it off and hope it goes away. Reach out to a professional who is well-versed in student loans such as a Certified Student Loan Professional (CSLP) who can help you get a plan in place that is appropriate for your personal situation.

Author

Drew Feutz, CFP®

Drew Feutz, CFP® is the Founder & Financial Planner of Migration Wealth Management, LLC.