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How To Prepare for the Restart of Student Loan Payments

Finance | 01/20/2022 23:00
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When the coronavirus hit headlines almost two years ago, the government delayed the repayment of student loans for millions of people to give them some economic reprieve. The Biden administration recently announced that they would extend the student loan payment delay to May 1st to give borrowers more time to adjust to repayment. This delayed repayment will affect about 27 million borrowers. So what does this mean for you and your finances?

Here are our top tips for preparing for the restart of student payments.

While student loans are deferred for the next few months, you should use this time to get your finances in order for when payments kick off again. Getting an organized budget and payment plan in place should be your top priority in this time period. Follow our tips below to make sure you are prepared.

Contact your Lender

First off, make sure your contact information is up to date with your lender. This will ensure that when things start back up you will not miss any payments. Missed payments can harshly affect your credit score. If you are unsure of who your lender is, go to StudentAid.gov and log into your account dashboard. The “My Loan Services” section will have the contact information that you need.

Contact your lender to determine exactly when your next payment will be due. If you haven’t changed your repayment plan since the deferment started, your payment due date should be the same date of the month that it was previously. If you were enrolled in an automatic payment plan before the first pandemic deferment (March 2020), YOU WILL NEED TO OPT BACK IN. This is important; you do not want to assume that the payment will be made automatically. If you signed up for automatic payment after March 2020, you should still be on an automatic payment plan. But always double check to be sure. Again, missing payments can have disastrous effects on your credit score.

You should receive a statement three weeks before your first payment is due. 

Revisit your Budget

You may be wondering if you will be able to keep up with your monthly payments when the student loan repayment starts back up again. Now is a great time to restart (or start!) your budget. 


To start your budget, figure out all of your fixed expenses for the month. These are costs that do not vary from month to month and can include your rent or mortgage, car payment, cable bill, and internet, among others. Your student loan payment would fall into this category. 

Next figure out all of your variable expenses for the month. These are expenses that change from month to month. They might include your groceries, electric bill, and entertainment. Look at credit card statements or receipts to determine what your average expense is in each category.


Next up look at your income. Include your full time job as well as any other additional income you may have from side jobs. 

Balance It Out

Once you see how much you have coming in every month vs. what you have going out every month, you can see how balanced your budget is. Do you have extra money every month? Great! You can put some of it in savings or an emergency fund, or set it aside to make additional student loan payments. If you do not have extra money every month but are instead in the red, see where you can make adjustments and cut spending. 

Consider making the following adjustments to your spending habits:

  • Switch from name brand to generic when grocery shopping

  • Cut out subscription services that you don’t need (Netflix, Hulu, HBO; what can you live without?)

  • Be diligent about turning appliances off when you aren’t using them. 

  • Cut back on eating out and ordering takeout

Additionally, auto refinancing might be a good way to reduce your monthly expenses. Refinancing to either a lower APR or extending the repayment plan of your car loan can affect your monthly payment a great deal. If you have a car loan, contact Auto Approve to get a quote and see how much money they can free up in your monthly budget.

If you know that your student loan payments will be unmanageable, you should consider adjusting your payment plan. And for a more in-depth look at creating a budget, check out our blog post on budgeting 101.

Look Ahead and Adjust Your Payment Plan (If Necessary)

You should have a good idea of what your monthly payments will be when the deferment is over. And if you prepare a budget, you should have a good idea of what you are able to spend on your student loan every month. Look at your current student loan repayment plan and decide if you need to change to a different repayment method.

Repayment plans are either calculated over a set period of time, or they are income driven. Let’s look at these in more depth.

Fixed Time Repayment

Your repayment plan is most likely calculated over a set period of time. These can be broken down into three categories, each with different terms and conditions. 

  • Standard Repayment: Also known as fixed payment loans, this is the payment plan you will default to if you do not pick another type. Under this repayment you will pay a fixed amount every month of at least $50 for up to 10 years depending on the size of your loan. You will pay the least amount of interest under this plan and pay off your loan quickest.

  • Graduated Repayment: Graduated repayment means that your payments will be lower in the beginning and increase as time goes on. This can be especially helpful when you first graduate, as you will expect to make more money as time goes on and you advance in your career.  Only certain loans are eligible for this type of repayment.  

  • Extended Repayment: Under extended repayment, your monthly payments will be much lower but you will repay the total amount over a much longer time period. 

Switching from a standard repayment plan to either a graduated repayment or extended repayment may be a good option if you expect to have a difficult time making your current monthly payments.

Income-Driven Repayment Plan

If you are having trouble with a fixed repayment schedule, you may be eligible to switch to an income-driven repayment plan. These repayment plans are based on how much money you earn, so they are especially helpful if you are not earning what you may have expected to earn. These loans also forgive your remaining balance after a set number of years. These repayment plans are complicated and have many rules, but if you can reconfigure your loan to an income-driven repayment, you may save yourself a lot of money in the long run.

Deciding on a Repayment Plan

If you are wondering what repayment plan is best for you, there are tools out there that can help you decide. StudentAid.gov has a loan simulator that can help you decide which is best for you. Whether your goal is to reduce monthly payments or pay off your loan as soon as possible, the simulator will help you decide what you qualify for and what is the best option for you.

Look into Deferment or Forbearance Only in Emergencies

When May comes and it’s time to restart payments, you may enter into panic mode and opt for deferment or forbearance. While these are options, it is important to remember that these should be used only in dire situations.

What’s the difference between forbearance and deferment? In forbearance, your monthly payments will stop but interest will still accrue. In deferment, your interest will stop accruing for the time that your loan is deferred. Deference is definitely preferable to forbearance and can provide additional relief if you are in tough times. But remember that you will still be accountable for the money that you owe.

Forbearance should always be a last resort and should only be used temporarily. If you have a large, unexpected bill (such as a large home repair or unexpected medical bill) forbearance might be your only option. But your loan will still accrue interest and your payments can balloon if you are not careful. 

Those are our top tips for preparing for the restart of student loan payments.

The past few years have been financially difficult for so many people. It’s important to keep in mind however that help is available. Whether you need help with changing your repayment plan or need help with budgeting, there are resources available to help you determine the best path forward.

If you need some extra breathing room in your budget, consider auto refinance. By lowering your APR or lengthening your repayment plan you may be able to free up money in your monthly budget. Set yourself up for success before the repayment starts and contact Auto Approve to get your free quote today!


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