Will federal student loan payments restart? Here’s how to prepare

With just over a week until federal student loan payments resume, borrowers should take a few steps to ensure they don’t miss a payment.

It’s still not clear if loan payments will resume on September 1 (and if you received an email notification that a payment was due, it was reportedly a mistake). President Joe Biden may yet announce an extension of the pause in student loan payments that has been in effect since the beginning of the COVID-19 pandemic.

With the pause nearing its end, financial advisers and other experts are encouraging some 43 million federal borrowers to prepare to repay.

Here are a few things to do now, whether student loan payments resume on September 1 or sometime in the future.

1. Update your contact information

A lot can happen in two and a half years. You must log into your Federal Student Aid (FSA) account and ensure all information is up to date.

Check which company is servicing your loans during your stay, as millions of borrowers have transferred their loans to new payment companies since they last made a payment. You can find out who your servicer is – some of the companies are FedLoan, Mohela, Nelnet and Great Lakes Educational Loan Services – by going to the ‘My Aid’ section of the FSA website and then clicking on ‘View Loan Servicer Details’.

2. See how much you owe

If you’re among the 82% of federal borrowers who haven’t made a student loan payment since the hiatus began, you should log into your account to see how much you owe each month and work it into whatever budget you use , says Josh Simpson, a Florida-based financial advisor. You should also be able to see the due date on your invoice.

3. Consider a new repayment schedule

If you find that you can’t afford the monthly payment, you can sign up for another type of repayment plan.

An income-controlled repayment plan (IDR) bases your monthly payment on how much money you make. This can be helpful for those who don’t have much wiggle room in their budget as payments can be as low as $0 per month. However, interest will still accrue, so calculate carefully.

4. Sign up for automatic payment

If you can afford your monthly bill, sign up for automatic payment so you don’t miss out on payments.

Not only will you avoid missing a payment, you’ll also save on interest: All government loan servicers (and many private lenders) reduce your interest rate by 0.25% when you sign up for automatic payments, potentially saving you hundreds of dollars in interest save over the life of the loan.

If you were enrolled in automatic payment before the pandemic pause, don’t assume that you will be when payments resume. If you haven’t made a payment for two and a half years, you’ll need to re-register.

5. Check your credit status

If you were in arrears before the pandemic began, you may be able to apply to be put into good standing when payments resume.

That’s due to the so-called Fresh Start program, an attempt by the Biden administration to bring about 7.5 million borrowers out of default. This will allow those borrowers to regain access to payment options like income-contingent repayment plans, get back on the forgiveness path, and avoid collection efforts, including wage garnishments and fees.

Once the program is officially launched, defaulting borrowers will be able to select a new repayment schedule at MyEdDebt.Ed.Gov. At that point, the loans will be transferred from Maximus, the servicer that processes defaulted student loans, to a new loan servicer, according to a Department of Education fact sheet.

After the transfer, the default status is removed from the borrower’s credit reports. Borrowers have one year from the end of the payment pause to apply for a new payment plan.

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