It’s been more than three years since the Department of Education paused student loan repayments to help borrowers during the COVID-19 pandemic. Now that the emergency of the pandemic has passed, repayment is set to resume this October, with interest accruing on loans again as of Sept. 1.
The total federal student loan debt in the U.S. is $1.6 trillion and rising, according to the Department of Education. This means that roughly 45 million borrowers are about to be saddled with another $200 bill per month (on average), according to Experian.
Experts say borrowers should be proactive about repayment, budgeting, and managing your finances—so you’re not taken off guard when October rolls around.
Here’s how to prepare:
First, visit the Department of Education’s student loan website and follow the instructions to find your servicer and update your contact information. This way, you won’t miss any important billing information and can get an idea of how much you’re going to owe each month.
Second, dust off your budget and make sure you have the appropriate amount of money earmarked to pay toward your student loan. If you don’t have a budget and don’t know where to start (or need help making it more efficient), try talking to a certified credit counselor. They can help you design a budget that’s right for your household.
Third, make a plan to pay off your credit card debt. If you make an appointment with a certified credit counselor, ask about a debt management program (DMP). Under a DMP, your credit card debt is consolidated into one affordable monthly payment, typically with lower interest rates. This way, you can offset the burden of debt, so you have the funds available to pay on your student loans.
Finally, President Joe Biden’s student loan forgiveness proposal may not have passed, but the Biden-Harris Administration launched the Saving on a Valuable Education (SAVE) plan in August. An income-driven repayment plan, SAVE is slated to go into effect by July 1, 2024, and it was created to help keep monthly payments low ($0 for some households). For more information or to fill out an enrollment application, visit the Department of Education website.
Although some student loan forgiveness is potentially on the horizon, high credit card interest rates in addition to a new monthly bill can be challenging. By being proactive and taking steps to help yourself get out of debt, you can maintain (or attain) a financially healthier you.
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