Federal student loan borrowers are expected to start making payments again this month following a three-year pause due to the pandemic.
If you have a month to pay at least 21 days before your due date, you should expect a bill that lays out how much you have to pay each month. It's likely that most borrowers have already received their bill, but if you have not, visit your loan servicer account. In September, interest began accruing again.
If you have loans and haven't paid in the last three years, don't panic. To get a sense of who is your loan servicer, log in to your StudentAid.gov account and find out who is your loan servicer. Many loan servicers changed during the pandemic, so you might have a different one than you did back in March 2020, said Amy Czulada, one of the student Borrower Protection Center's Outreach and Advocacy Managers.
After you have found your loan servicer, log into your account with them to access your student loan balance, monthly payment amount, and interest rate. Czulada also recommended that you look at what type of student loan you have, so you know which income-driven repayment plans you might qualify for.
When you receive all significant correspondence, update your personal information in your account with your loan servicer.
With their loan servicer, investors can determine what monthly student loan payment they will receive on their account. If you don't know who your servicer is, you can find it by logging into your studentaid.gov account.
If you think you'll be unable to make payments once they're resumed, you have several options.
This summer President Joe Biden announced a 12-month grace period forborrowers who struggle after payments reset. You can and should make payments during the first 12 months after payments resume, but if you don't, you won't be at risk of default and it won't hurt your credit score. Betsy Mayotte, president of the Institute of Student Loan Advisors, recommends that you research if you qualify for an income-driven repayment plan. StudentAid.gov or TISLA's website can be used as a loan-simulator tool to find a payment plan that best meets their needs. The calculators provide you with a monthly payment under each plan, as well as your long-term expenses.
An income-based repayment plan establishes your monthly student loan payment at an amount that is intended to be affordable based on your income and family size. The federal student loan program takes into account a variety of expenses in your budget, and most federal loans are eligible for at least one of these types of plans.
The payment amount under an income-driven repayment plan is a percentage of your discretionary income. If your income is low enough, your payment could be $0 per month.
The administration announced a new income-based repayment plan in November last year. The SAVE plan offers some of the most lenient terms in the industry. The interest rate will stay low as long as borrowers make regular payments.
It's still possible that the SAVE plan could face legal challenges similar to the one that led the Supreme Court to strike down Biden's proposal for mass student loan cancellation.
If you've been working for a government agency or a nonprofit, the Public Service Loan Forgiveness program offers cancelation after 10 years of regular payments and some income-driven repayment plans cancel the rest of a borrower's debt after 20 to 25 years.
Borrowers should ensure they are signed up for the best possible income-driven repayment plan to qualify for these programs.
Borrowers who have been defrauded by for-profit colleges may apply for borrower protection and receive relief.
If you want to repay your federal student loans with income-driven plans, fill out an application through the Federal Student Aid website.
You can enter automatic payments through your loan servicer's account. Borrowers who were enrolled in automatic payments prior to the payment pause need to re-enroll again, Czulada said.
Czulada recommends staying vigilant about scams. If you want to get help with your loans or apply for any programs, you should never have to pay for it.
that's a red flag that it's a scammer, Czulada said.
Charles Schwab Foundation supports the Associated Press for educational and explanatory reporting to enhance financial literacy. The independent foundation is not associated with Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.