Spotlight on Student Loans:

Student Loan COVID Forbearance Ends Jan. 31st

Start preparing for repayment now

With student loan payments resuming in a few months, it’s a good idea to start preparing sooner rather than later. The Dept. of Education has pushed out the extension until next year, they’ve indicated this will definitely be the last one. We speculate that forbearance may have been extended due to a host of factors, such as lack of servicer preparedness, financial hardships for borrowers, and the departure of FedLoan. Thus, the safest course of action is to plan for payments to resume in February; the hard work will already be done for whenever repayment comes down the pike.

How you can be ready to resume paying your student loans

If you haven’t touched your student loans since March, 2020, don’t worry, you’re in the same boat as—quite literally—millions of other borrowers. To get yourself ready for repayment, some ways you can stay ahead of the curve are:

  • Find and download your most recent correspondence regarding your IDR plan
  • Do the same with your employment certification if you’re pursuing PSLF.
    • Find your tracker letter with your qualifying payment chart.
    • Take steps to prepare yourself for FedLoan’s departure from the federal student loan scene.
  • Make sure your contact and banking information are current on your servicer’s website
    • Outdated information could create delays in communication and/or auto-debit payments
  • If your income has decreased since your last income recertification, consider recertifying before January, so you can potentially reduce your monthly payment.

Prepare for missing the income that will go toward student loans

Many of us put our student loan savings over the last year-and-a-half to good use, purchasing homes, automobiles, and paying down credit card debt. That boost in savings is soon to end, however, and borrowers need to be prepared. Whether your payment will be $250 or $2,500, it will impact how much you can afford to spend on both daily expenditures and major investments. Consider setting money aside in the coming weeks to prepare you for those loan payments come February. You could even do it gradually: if your payment is $2,500/mo., put $500 aside in September, then put $1,000 aside in October, and so on. When your payment comes due in February, you’ve eased into the idea of not having that money to spend on other things, and you’ve already got an extra $7,500 in the bank.

For those pursuing PSLF, they’ve had the added benefit that these months of forbearance have counted toward their 120 qualifying payments required for forgiveness. The economy, however, remains fragile, and many are wondering what will happen as student payments resume in the coming monthsnot to mention the end of expanded unemployment benefits for millions of Americans.