Tips To Prepare Your Finances For When Student Loan Payments Start Again

When the pandemic student loan repayment pause officially comes to an end this September, many will be left with higher expenses than they're used to. So, just how can everyone prepare?

As noted by NBC's News, June 2023 came to an end with the Supreme Court putting an end to President Biden's pandemic-era student loan repayment pause. The move comes as a major blow to anyone previously benefiting from the arrangement, particularly in the midst of the cost of living crisis — and women are most likely to be affected by the new developments. Per USOW, the majority of student debt is owed by women (a factor certainly not helped by the gender pay gap) — and the impact of that is major. According to GM Law Firm, LLC, more and more women are delaying motherhood, simply because their debt makes it an unaffordable undertaking. And, for Women of Color, statistics only become more dire. Per The Education Trust, Black women earn significantly less than white women, making repayments even more of a struggle.

In the wake of this news, the White House has announced that new alternatives are being drafted up. However, until those come into effect, debt repayments will officially recommence in October — so it's time for a game plan.

As advised by Federal Student Aid, debt repayments will be payable in October 2023. And, while the Secretary and Department of Education are working on ways to make the loan repayments more manageable, that date needs to be adhered to. However, emphasis on October because as Institute of Student Loan Advisors President Betsy Mayotte told AP, unless you have the cash on hand, "There's no reason to send that money to the student loans until the last minute of the 0 percent interest rate."

That said, that doesn't mean forgetting about the payment altogether until its due date. Far from it, as Student Loan Servicing Alliance's Scott Buchanan explained to Vox, the best port of call is to "Pretend that the resumption has already occurred." The only difference is, instead of sending that money to lenders you'll be storing it in a savings account. Buchanan isn't the only student loans expert to make the suggestion. As noted by Mayotte, saving that repayment helps borrowers acclimatize to their new expenses — and there's another perk: You'll be, "Earning a little bit of interest as well." Frustrating to fork out, sure, but a small win given the situation.

Putting aside repayments in a savings account is a great idea for those in a position to do so, but the reality is, not everyone can. However, there are still options available. For starters, per the White House website, borrowers will have a 12-month "On-ramp" period from the time the pause ends. During that time, there won't be penalties for missed payments. Interest will continue to accumulate, though, so if you are able to put something towards those loans, it may be wise to look into the four income-driven repayment options outlined by the Federal Student Aid website.

Income-driven repayment plans (Pay-As-You-Earn, Revised-Pay-As-You-Earn, Income-Based Repayment, and Income-Contingent) require borrowers to apply, and borrowers have yearly check-ins. As the name would suggest, income is taken into account, and in some cases, if that income falls below a certain threshold, no repayments will apply. What's more, in the event that financial circumstances don't improve, and the loan isn't paid off during the repayment period (depending on the plan, that's between 20 and 25 years), the loan is forgiven. There is one caveat, though: If you've already defaulted on your student loan, you won't qualify for income-driven repayment. That said, you may qualify for the Fresh Start program, which was set up specifically to help borrowers get out of default. Per Federal Student Aid, you'll need to contact your lender to find out if you qualify.

The unpausing of student loan repayments is a big deal, and one that'll affect over 40 million Americans, at that. For that reason, if you're not understanding anything about your loan, or if you want to switch from one plan to another (or see if doing so is even a possibility), it's advisable to speak to the pros. As finance professional, Fran Gonzalez told AP, having the right information when she herself was a student could have made a world of difference. After all, as she pointed out, "It's a huge financial decision."

Just one thing: this isn't a conversation you'll want to delay. As Scott Buchanan told Vox, because of how many people will be affected by the unpausing, "If everyone calls us on September 1, we're going to have a lot of heavy call times and call hold times, and payment and processing could be delayed." In other words, get in contact with a financial advisor or your lender as soon as you can. The unpausing of student debt repayments is an unfortunate reality, and for many, it will have a major, long-term effect on finances, and even other areas of life, like health. However, knowing as much as we can, going into the changes can go a long way.