Borrowers of federal student loans need to get ready to start making payments again. This is true even though President Biden has once again extended the suspension of federal student-loan payments through Aug. 31. The pause has been in effect since early 2020, and while it is certainly possible it will be extended again, or the government could cancel certain student-loan debt entirely, as some advocates are pressing for, borrowers need a game plan. Thinking through these things now can help ensure you aren’t left scrambling later on.

Here are some answers to questions about what to do.

Q. What can I do now to prepare?
A. Get organized. Update your contact information with your loan servicer and on studentaid.gov. Review your repayment-plan options using the Federal Student Loan Simulator tool at studentaid.gov/loan-simulator to see if you might be better off with a different plan, such as an income-driven repayment plan, where payments are tied to your income and family size.

Some borrowers might have to take additional measures, such as finding a higher-paying job, taking on additional work, selling personal belongings, finding less-expensive housing or borrowing from family or friends. A November study from Bankrate.com and BestColleges.com found three in five borrowers who earn at least $100,000 a year would need to take some form of additional action to pay down their student debt. This figure climbed to 71% for those earning between $50,000 and $99,999 a year, and to 72% for those earning less than that.

Q. Will auto-debit payments resume?
A. For most borrowers who were making automatic loan payments from a checking account, those payments won’t restart automatically. You will need to opt in again, according to Federal Student Aid. Review your auto-debit enrollment or sign up for this service before payments resume.

Q. Will my monthly payment remain the same?
A. Many borrowers will have the same interest rate, but that may not be the case if, for example, you consolidated your loans during the pause, according to Federal Student Aid. Contact your servicer for details about your rate.

Q. What if my monthly payment is still too high?
A. You might be able to lower your monthly payment by switching to an income-driven repayment plan. If you aren’t eligible for one of these plans, talk to your servicer to see what other options exist.

Q. What if I have loans in default?
A. If you have loans in default, contact your loan servicer now to discuss options so you will be ready when payments resume. For eligible loans in default, tax refunds and child tax credits won’t be withheld, wages won’t be garnished, Social Security payments (including disability benefits) won’t be withheld, collection calls and billing statements won’t be sent out, and interest won’t accrue, according to Federal Student Aid. People who are in default on Direct Loans, Federal Family Education Loan program loans, Federal Perkins loans held by the Education Department and HEAL loans are eligible for this temporary relief, Federal Student Aid says.

The Education Department also said it will give borrowers with loans in default a “fresh start” on repayment. While there are further details to come, this should eliminate the impact of delinquency and default, and eligible borrowers should re-enter repayment in good standing by the end of the payment pause, according to the National Consumer Law Center’s Student Loan Borrower Assistance Project.

Q. What other options could borrowers look into?
A. Job seekers and current workers should ask employers about any student-loan reimbursement programs available through the company or organization, says Stacey MacPhetres, senior director of education finance at Bright Horizons EdAssist Solutions, which provides tuition and student-loan assistance to employers. The Goodly Jobs Board, available at goodlyapp.com/payoff, lets job seekers browse job postings from thousands of companies that offer student-loan benefits. Employers can contribute as much as $5,250 per employee annually toward eligible education expenses, like student-loan assistance, without increasing the employee’s gross taxable income.

This article was written by Cheryl Winokur Munk and published in the Wall Street Journal on April 8, 2022.

1. https://www.wsj.com/articles/how-to-prepare-for-student-loan-payments-restart-11643849282

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