For millions of parents, this fall is all about extra-stressful back-to-school vibes — as they settle their kids into new classrooms and new routines, and as they brace themselves for the return of monthly student loan payments. After a long and eventful three-year-plus hiatus, student loan payments will resume in a few weeks. Interest kicks back in on September 1, and the first payment is due in October.
According to the Education Data Initiative, the average student loan debt is north of $37,000 and the average monthly payment is about $500. While no amount of preparation will lessen the shock of that change on family budgets, laying the groundwork now — before payments resume — is essential, says Scott Buchanan executive director of the Student Loan Servicing Alliance.
“It’s going to be a challenge for a lot of people [who] re-adjusted their budgets,” during the pandemic pause, Buchanan says. “That’s going to be a big adjustment for many people, getting back into that routine of making that part of the list of things that you pay every month. But in the interim, there’s a lot of solutions for borrowers.”
Since the vast majority of us last made student loan payments, a lot has changed — so how can we best prepare? Fatherly spoke to three student loan experts about the new landscape of student loan repayment, what to expect, and how to get ready for October. Bottom line: Don’t delay. Figure out what you owe and what repayment plan will work for you — now.
1. Log in to studentaid.gov
Before September 1 rolls around, log into your student loan account and check to see if all of your information (email, address, phone number, etc.) is up to date — and to see if you even have the same servicer.
“Figure out where your loans are,” says Jantz Hoffman, CEO of the Certified Student Loan Advisors Institute (CSLA). Since the pandemic payment pause began, at least three major student loan servicers have shut down. “Fed Loan Servicing, Great Lakes, Navient,” says Hoffman, “ have all closed shop. None of those companies are servicing student loans anymore, and those three companies were the predominant servicers of most people’s federal student loans.”
So it’s likely your loans have moved, and this is a critical first step for a reason: “Before you can figure out what repayment plan you’re on, or what your payment is supposed to be, you need to figure out where your loans are,” says Hoffman.
2. Choose a new monthly payment plan
After you log in to your studentaid.gov profile, check your contact information, and confirm which company is servicing your loan, the next step is to figure out how much you’ll have to pay each month, beginning in October. While this might sound straightforward, that number may change dramatically based on which repayment plan you choose — and qualify for.
“A lot of folks [are] feeling the anxiety of payments restarting,” says Amy Czulada, the outreach and advocacy manager at the Student Borrower Protection Center. “We’re hearing a lot of stories of people who are unable to pay when the time comes, and who just haven’t had this in their budget for the last three and a half years, and now they’re going to have to think about that again.”
If you’re worried about your ability to make payments, it’s “a good idea to think about income driven repayment plans in preparation for return to repayment,” says Czulada. “These plans are often more affordable for folks. After 20 or 25 years in repayment, they’re also eligible to be canceled.”
Some repayment plans have been totally overhauled over the past three years, too. If you were enrolled in REPAYE, you’ll be automatically enrolled in the government’s new SAVE program — but whether you’re automatically enrolled or choose to sign up now, make sure you know everything about the changes that are coming your way. (Check out Fatherly’s quick guide to SAVE.)
If you’re unsure of whether an income-driven repayment (IDR) plan makes sense for you, you can run the numbers on the StudentAid.gov. Calculator, which can help you figure out which plan, if any, will be most affordable for you going forward. And if you’re already enrolled in an IDR plan, remember that you need to recertify your income every year — so keep an eye out for when that time comes.
Sorting through all those variables can be tricky, says Hoffman — all the more reason to tackle it now. “The determination as to whether or not a borrower should be paying off their loans or using an income-driven repayment plan is multifaceted.” What are your goals outside of your student loan payments? Do you want to buy a house? Do you anticipate being higher-income in the future or getting married to someone with a higher income? Has your financial position changed since 2020, for better or for worse? The question isn’t just whether or not an IDR plan is right for you, notes Hoffman. There are several different IDR plans. Which IDR plan will get you where you need to go?
Once you’ve made those decisions — and don’t be afraid to talk to a licensed, registered fiduciary who is fee-only if you can afford to — log in to your student aid portal and choose your repayment plan, or contact your loan servicer to do so. This process can be “a little bit cumbersome,” says Hoffman, because you have to provide proof of your income. But after repayment starts in October, borrowers have a six-month grace period in which to simply self-certify their income.
3. Consider automating payments
If you were on auto-debit before the pandemic payment pause, don’t expect that your student loan payment will be automatically deducted from your account going forward. In fact, says Czulada, the Department of Education is not going to automatically renew auto-debited payments.
The importance of this is two-fold: If you want to get your payments auto-debited from your checking account, for example, “you’ll need to set that up proactively,” Czulada says. But on the flip side, “it’s a good idea for borrowers to make sure they’re not getting their payments auto-debited from their account [by mistake] since the Department of Education stated they’re not going to do that. If that is happening, that’s a problem.”
4. If you’re in default, consider Fresh Start
The fact of the matter is that not all 45 million borrowers are going to be in a position to resume repayments, even if they enroll in an IDR plan. If you were in default before the pandemic payment pause began — about 7 million people are in default right now — Czulada recommends considering Fresh Start, a program designed to help borrowers in default get back on track to repaying their loans. Fresh Start saves you from involuntary collections, helps you expedite getting out of default, and “immediately restores your ability to go on these income-driven repayment plans” that can get you on the track to repayment.
5. If you have Parent Plus loans, consider double-consolidation
Yes, there are even more plans to consider. If you’re a borrower who has Parent Plus loans — that is, loans you took out to help put your kid(s) through school — you may want to also consolidate those loans. You could, for example, get on to an income-contingent repayment plan — which takes about 20% of your income. You could also “do something called a double consolidation,” Hoffman says.
If you do a series of consolidations on your loans, you might qualify for IDR programs you wouldn’t have previously, such as SAVE. “But that window to take advantage of it closes in July of 2025,” says Hoffman. “You can see why this is a graduate level unit coursework… because it’s not simple.”
6. Make sure you can benefit from Biden’s one-time audit of IDR accounts
While Biden’s wholesale student loan forgiveness plan — which would have canceled $10,000 for borrowers with federal loans and $20,000 for borrowers with Pell Grants — was essentially axed by the Supreme Court, other aspects of his plans to make student loans less burdensome have moved forward.
Reporting from the Student Borrower Protection Center in 2022 found that only 200 people — out of a potentially qualifying 4.4 million — would have their their loans forgiven through income-driven repayment programs between 2020 and 2025, or a “1 in 23,000 chance.” A separate Government Accountability Office (GAO) report found that loan servicers have “no way” of tracking how close people are to that threshold, says Czulada.
As a way to deal with these huge issues, the Biden administration is performing a “one-time audit” of folks in IDR plans to help people get close to forgiveness — in part by including borrowers who were steered toward deferment or forbearance rather than being enrolled in IDR plans by their servicers.
If you want to be considered for this adjustment, and if you have older loans, like FFEL, which aren’t held by the Department of Education, consolidate those loans into a direct loan as soon as possible, so you can be eligible for the adjustment. The deadline to consolidate your loan is December 31, 2023. For folks who don’t need to consolidate their loans, the IDR adjustment process could be automatic.
7. Don’t wait until the last minute
Remember that when you log in to your student aid profile, you will be one of millions doing so. The sooner you can start the process, reach out, and get your information squared away, the better.
“Don’t wait until the last minute,” says Buchanan. “If 35 million people all wait until October 1st to pick up the phone and call, then that’s going to create some challenges. People will be on hold for a while… If the website isn’t helping you, or you have questions about [your loans], figure that out now. Call us now,” Buchanan says. “Don’t wait for the crush of September or October in order to make sure that you have got the information that you need.”
In part to manage the potential chaos of the first year of repayment, the Department of Education has set up what amounts to a phase-in year, where you won’t be penalized for non-payment and you won’t be reported as delinquent to your credit bureau.
This isn’t just for the benefit of borrowers — loan servicers are facing the unprecedented task of getting more than 44 million borrowers back into the system.
Inevitably, there will be “delays, errors, and it’s going to be difficult to get ahold of your loan servicer… processing time is going to take a lot longer,” Hoffman warns.
Still, the on-ramp period is crucially not a continuation of the pause, as Scott Buchanan from the Student Loans Servicing Alliance says. It’s just wiggle room.
“If, over the course of the first few months of the resumption, you are having some challenges figuring out exactly what you owe, who to pay it to, all that sort of stuff, you’re not going to get negative credit bureau reporting.” But, Buchanan notes, “Interest is still accruing, and that period of time is not going to count towards any of the forgiveness programs. It really is an emergency backstop for people who are having challenges.”
8. Don’t count on debt forgiveness coming any time soon (or ever)
Borrowers who applied for student loan forgiveness and “received” it before the Supreme Court first issued a stay on the program and ultimately overturned it, may find themselves back in a difficult position, newly burdened with the “forgiven” debt and facing higher payments.
Still, while Biden has announced he’s exploring an alternative path to forgiveness, Buchanan puts it this way, with a little bit of tough love: “Don’t build your financial life based upon a hypothetical future. Build it based upon what is in front of you today. It will be next year before we’re even talking about whether forgiveness will or will not happen. Base your budget today on what you know to be the case.”
9. Watch out for scams
And finally: Scammers will use this chaotic time to try to take advantage of vulnerable borrowers. Be aware of tactics that scammers may use to get your financial information. “There are going to be a lot of fraudsters who try to take advantage of this moment,” Buchanan warns.
If a company reaches out to you and says they can help you manage your student loan payment or help you access a forgiveness program, be skeptical. “The only entities that can help you access forgiveness or lower your monthly payment is your designated servicer from the DOE,” says Buchanan.
If anyone calls and asks for money in return for help, that’s fraud. And if you get phone calls that claim to be from your servicer but you’re not sure, Buchanan recommends hanging up the phone and calling the number of the loan servicer on your billing statement to be doubly sure.
“A legitimate financial advisor is fine,” Buchanan says. After all, as Hoffman notes, student loans are a minefield of confusing financial information. But make sure you’re talking to a legitimate advisor. Buchanan notes a financial advisor won’t charge you per transaction on your student loan — and instead will charge a monthly fee. Stay vigilant!