Preparing for Student Loan Repayment: A Comprehensive Guide

Student loan payments on most federal student loans are scheduled to resume on October 1, 2023. The moratorium on payments has been in place since March 27, 2020, when the Coronavirus Assistance, Relief, and Economic Security (CARES) Act was signed into law. With the average student loan borrower holding $39,032 in debt, it’s crucial to prepare for the resumption of payments. In this article, we’ll guide you through the steps to get ready for student loan repayment and manage your finances effectively.

When Do Student Loan Payments Resume?

The student loan payment pause has been extended eight times since it was first introduced. However, with the recent debt ceiling deal, the administration will not seek to extend the moratorium again. Interest will start accruing on federal loans on September 1, and payments will resume on October 1. Additionally, the Supreme Court struck down the Biden administration’s widespread student loan forgiveness program, so borrowers need to prepare to start making payments again.

How to Prepare for Student Loan Repayment

Depending on your situation and budget, there are several ways to approach paying down your student loans. Here are some strategies to help you prepare:

Make a Budget

If you don’t already have a budget in place, now is a good time to start. A budget helps you understand where your money is going. Begin by writing down your income and expenses from the past few months. Break out your expenses into different categories to make decisions about how to allocate your spending. Use a budgeting app, a spreadsheet, or whatever works best for you. With this information, plan your spending for the upcoming month, including your student loan payment.

Cut Costs

It’s been a long time since student loan payments were required, and your budget may have changed. If you’ve started using the money that would have gone to student loan payments for other purposes, you may need to cut back in certain areas. If your financial situation has improved, consider putting more toward your student loans than required. Even a little extra each month can reduce your repayment period and save you money on interest.

Earn More Income

If you have the time, look into opportunities to earn more income. This could include working overtime, taking on a part-time job, or starting a side hustle. Some common side hustle options include:

• Driving for Uber or Lyft
• Delivering food or groceries for apps like DoorDash and Instacart
• Buying and selling used items online
• Renting a room on a short-term rental website
• Performing odd jobs on Craigslist, Mechanical Turk, or Thumbtack
• Tutoring young students
• Becoming a mystery shopper
• Walking dogs

Consider several options, including the time requirement, flexibility, and pay, to find the best fit for you.

What to Do if You Can’t Afford Your Student Loan Payments

If you believe you might have trouble paying your student loans once the payment pause ends, here are some potential solutions:

Request Forbearance or Deferment

The federal government offers forbearance and deferment for people experiencing financial difficulties. Contact your student loan servicer directly for more information on your options.

Get on an Income-Driven Repayment Plan

The Department of Education offers four different income-driven repayment plans, which can reduce your monthly payment to 10% to 20% of your discretionary income. These plans also extend your repayment period up to 20 or 25 years, after which any remaining balance is forgiven.

Consider Student Loan Refinancing

Refinancing can reduce your monthly payments, but private lenders typically don’t offer income-driven repayment plans, and their forbearance options are often less generous than federal options.

Monitor Your Credit as You Pay Down Your Debt

As you begin repayment on your student loan debt, it’s important to keep track of your credit score and credit reports. With Experian’s free credit monitoring service, you can keep track of your FICO® Score and regularly review your Experian credit report. This helps you understand what impacts your score and address issues as they arise. You’ll also get real-time alerts when changes are made to your credit report, such as a new account or inquiry.

Contact O1ne Mortgage for Expert Mortgage Services

At O1ne Mortgage, we understand the financial challenges that come with managing student loan debt. If you’re looking to buy a home or refinance your mortgage, our team of experts is here to help. Contact us at 213-732-3074 for personalized mortgage services that meet your needs. Let us help you achieve your financial goals and secure your future.