Preparing For Federal Student Loan Payments

The federal student loan freeze on payments and interest expires on April 30, 2022. Here’s what borrowers need to know before student loan payments resume.

Updated April 11, 2023

Preparing For Federal Student Loan Payments is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

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It has been nearly two years since the coronavirus pandemic first brought the world to a standstill. To reduce the financial hardships caused by the pandemic the government paused federal student loan payments and set interest rates to 0% back in March of 2020. After many extensions to the nationwide pause, the latest and final student loan freeze will expire on April 30, 2022.

As of November 2021, student loan debt in the U.S. reached $1.8 trillion. Many borrowers hoped that President Biden would cancel student loan debt on a widespread level, bringing immediate financial relief to millions of Americans. However, the federal government recently passed a $2 trillion spending budget that did not include widespread student loan forgiveness in its plans.

People with student loan debt should not rely on universal student loan forgiveness to erase or lower their debt. Instead, borrowers should begin preparing to restart payments if they have not done so already. In this article, we share five things borrowers need to know to prepare for federal student loan payments.

See if Your Student Loans Qualify For Forgiveness

In October 2021, the U.S. Department of Education (ED) made changes to the Public Service Loan Forgiveness (PSLF) program. These changes will affect about 30,000 borrowers who work in public service, forgiving about $2 billion in student loan debt. Under the PSLF program, public service workers who made 120 monthly payments toward their federal student loan debt can apply for forgiveness. For example, teachers, nurses, and active-duty service members may qualify.

In addition, borrowers with a total and permanent disability (TPD) may qualify for an automatic discharge of their student loans. The ED announced in August 2021 that 323,000 borrowers with a TPB would receive over $5.8 billion in student loan forgiveness. These borrowers must be identifiable through data matching systems with the U.S. Social Security Administration or the U.S. Department of Veteran Affairs. They do not need to fill out an application to receive automatic loan cancellation.

Check if you qualify for student debt cancellation under these new regulations. If you do not, read on for tips to prepare for student loan payments to restart.

Revise Your Budget

Unless further action is taken, federal student loan payments and interest accrual will resume in May 2022. As the new year begins, borrowers should consider revising their budget to include their projected monthly payments.

As you create a new budget, think about the following questions. What have your expenses been like since the pandemic started? How have they changed, and how might adding student loans affect your overall budget? A new job, living arrangement, or salary can influence your budget. You should also know how much you owe and what type of repayment plan you've selected.

With this knowledge, borrowers can plan ahead and adjust their budgets accordingly. Using online budgeting apps can make the process easier. Keeping a budget may reduce the stress of readjusting to paying monthly student loan bills.

Review Your Selected Repayment Plan

Before federal student loan payments resume, borrowers should review their selected repayment plan. They should also consider whether their chosen plan is still the best option for them. According to the Federal Student Aid website, borrowers may change their student loan repayment plan at any time for no cost. They can do so through their loan servicer.

Borrowers can choose from many student loan repayment plans. For example, a graduated repayment plan offers one of the fastest tracks to pay off student debt, with a repayment period of up to 10 years. In graduated repayment plans, monthly payments increase every two years from a low starting point.

Borrowers may also consider an income-based repayment plan, which changes with a borrower's income level. Typically, monthly payments amount to a maximum of 10-15% of the borrower's discretionary income. This repayment plan can take up to 25 years.

The Federal Student Aid website offers a Loan Simulator tool. Borrowers can use this resource to browse eligible repayment plans and see monthly payment estimates to choose the best option for them.

Know if Your Service Loan Provider Has Changed

Currently, eight service loan providers manage borrowers' federal and private student loan debt in the U.S. However, with that number decreasing to six at year's end, about 10 million borrowers will get a new service loan provider in 2022.

The Pennsylvania Higher Education Assistance Agency ​​(FedLoan) and Granite State Management & Resources' (GSMR) contracts with the ED expire on Dec. 31. Navient, another student loan servicer, has requested to transfer their borrowers to Maximus once their contract ends in December 2023. But for now, borrowers under Navient management do not need to worry about their loan service changing.

If FedLoan or GSMR manages your loans, check to see where your loans will be transferred to. Servicers should notify their borrowers of this information by email. But borrowers can easily check for themselves by logging in to the federal student aid dashboard with their FSA ID username.

Finally, make sure your new loan servicer has your correct contact information so that you send payments to the right place. You may also consider downloading your payment history from your old service loan provider and keeping it for your records.

Verify Your Contact Information With Loan Servicers

Loan servicers need borrowers' contact information to send their monthly bills and share important updates with them. If your address, phone number, or email address has changed during the pandemic, update your service loan provider. Verify online that they have the correct information on file, especially if your servicer changed. Doing so will ensure a smooth transition to resuming payments come May.

Latest Posts is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

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