6 steps to prepare for student loan repayments starting in December
If you’re among the 41 million federal student loan borrowers, President Biden has announced great news. Individuals with an annual income of less than $125,000 (or under $250,000 for married couples or heads of households) are entitled to have up to $10,000 in federal student loans canceled.
Nearly 8 million borrowers may be able to receive debt forgiveness automatically because the Department of Education already has their income information, according to Federal Student Aid.
For others, the application to apply for forgiveness has been released. Even if you're not eligible for any student debt forgiveness, your loan repayments are still paused until year end.
If you are not eligible or want to know your current status, review these 6 steps confirm the details of your repayments are accurate or to make arrangements if you can’t afford your payments.
Step 1: Stay up to date on the forgiveness program.
Sign up for the U.S. Department of Education’s “federal student loan borrower updates” emails to be notified when the forgiveness application is available.
Step 2: Make sure your contact info is up to date.
When the pause ends, you will get a billing statement or other notice at least 3 weeks before your payment due date. Check and update your contact information on your your StudentAid.gov profile and with your student loan servicer. Your servicer is the company that you send (or will send) your student loan payments to each month.
Step 3: Confirm what your monthly payment will be.
Your student loan account with your servicer should list a monthly payment. If you can't access this information online, you can also call your servicer. Once you have a sense of your monthly payment, ask: Is it affordable under your current circumstances? If not, there are several payment options available. (See the next step).
Step 4: If you don't think you can afford your monthly bill, seek out additional payment options.
If you can’t afford your payments, the federal student loan program provides options for lowering your monthly payment. Some are based on your balance; others are based on your current income. The Loan Simulator, on the Department of Education's website, and the Student Loan Calculator, developed by the Institute of Student Loan Advisors, are two tools that can help you figure out which payment program is right for you.
Step 5: If you can afford it, start paying before the pause ends.
The pause on student loan payments also set loan interest rates to 0%. That means all payments made during the pause go straight to the principal—not the interest. For borrowers who might be in a comfortable financial position, it is a good opportunity to pay down as much of that debt as you can.
Step 6: Keep on the lookout for scams.
Scammers are targeting student loan borrowers—attempting to take advantage of circumstances related to the pandemic and government relief packages. If someone contacts you by email or phone and asks for personal information or money to suspend your student loan payment, it’s a scam. If someone asks for your loan account PIN or password, that's a huge red flag. Learn more about the other warning signs of a debt relief scam.