Simple Ways to Prepare for Student Loan Payments to Resume Soon
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| Economists Warn of Armageddon As Moratorium On Student Loans Comes To An End |
If you're one of the millions of Americans who got some relief from your student loans during the COVID-19 pandemic, it's time to start preparing for repayment again. But many economists are warning that when repayment resumes, it could spell "Armageddon" for individuals financially impacted by the pandemic who aren't ready to make monthly payments once again.
In this blog post, we'll explore what this means for borrowers and ways they can prepare for resuming their student loan payments.
When Will Interest on Student Loan Repayments Resume?
If you're wondering when you need to resume paying interest on your student loans, there is some good news. According to a spokesperson for the Department of Education, interest on student loans will start being charged again on September 1, 2023.
It's worth noting that payments will be due starting in October, so it's best to start planning ahead and budgeting accordingly. Additionally, the email or mail notification informing borrowers of this change will be sent well in advance to avoid any confusion.
What To Expect When the Pause on Student Loan Interest Ends
As the pause on student loan interest comes to an end, it's important to know what to expect. With 43.8 million borrowers holding federal student loan debt, millions of people will be impacted by the resumption of payments.
What’s more, today, the average federal student loan debt balance is $37,338, making it a significant financial burden for many borrowers. However, factoring in private loan debt brings the total average balance to as high as $40,114. With these numbers in mind, it's clear that the end of the payment pause means many borrowers will face difficult decisions about how to manage their debt and finances moving forward.
How To Navigate The Crisis Ahead: 5 Strategies For Borrowers
Learning to manage debt is essential for success in college and after graduation. However, sometimes, events such as the resumption of student loan payments and inflation are out of our control. Fortunately, there are some options that can help you manage the increased financial pressure, let’s look at these below.
Consider Refinancing Your Student Loan
If you find yourself struggling to make payments on your student loans after the repayment pause ends, consider refinancing your student debt. Refinancing can help you secure a more favorable interest rate, potentially lowering your monthly payments and saving you money in the long run. However, make sure to do thorough research and compare options from various lenders before deciding on a refinancing plan that works for you.
Calculate Your Interests and Monthly Payments
First, calculate the interest rates on your student loan debt. The longer it takes to pay off your debt, the more interest you will accumulate over time. Keep in mind that while the standard timeline for repayment is 10 years, it takes most graduates on average 20 years to pay off their student loans.
Check If You Are Eligible For Forgiveness
If you earn less than $125,000 annually or you belong to special demographics, you may be eligible for student loan forgiveness options. Make sure to check your eligibility before crafting a play to repay your student loan in full.
Find The Best Repayment Option
Now that your student loan repayment pause is coming to an end, it's time to start thinking about the best repayment option for you. One of the most popular options is Income-Driven Repayment (IDR), which bases your monthly payments on your income and family size. This means that if you're earning less than a certain amount each year, your monthly payments will be reduced accordingly.
Create a Budget To Manage Your Debt
One important step in managing your student loan debt is creating a budget. This will help you monitor your income and expenses so you can see exactly where your money is going each month. By tracking your cash flow, you'll be able to identify areas of spending that can be reduced or eliminated altogether.
You can also prevent your debt from swelling by focusing on a single repayment project, managing your credit card expenses, and learning more about personal finance. If you are looking to pursue higher education, you can avoid creating more debt by studying abroad!