One of the few not-awful things to come out of the pandemic was that the feds gave people a break from paying their student loans. 

But nothing lasts forever and that’s true for the student loan payment “pause.” At some point,  you’ll need to start making those payments again.

We’ll walk you through what’s new and what your options are.

Update: Student loan payment suspension extended to May 1, 2022

Good news: The Biden adminstration has granted another extension for the student loan payment freeze. So any payments you would normally owe are on hold until then. The reduction of student loan interest to zero percent also remains in effect. 

That also means you have even more time to take advantage of some of the benefits such as building savings, paying off debt, or reducing your student loan principal by continuing payments (if you’re able). Keep reading below for details. 

Background on student loan forbearance

First, a quick refresher on what happened and what’s changing: In March 2020, the CARES Act provided several types of aid and benefits to help the many people who had lost jobs, were sick, or were dealing with any of million other issues that cropped up as COVID swept the country. One of the biggest changes was pausing federal student loan repayments and dropping the interest rate to zero. 

But that’s about to end so you’ll need to make sure you’re ready to start paying again on Feb. 1. You can start with these four steps.

1. Make sure you know who your loan servicer is

As 2021 ends, several federal student loan servicers are ending their contracts with the government and transferring their loans to other servicing companies.  You’ll be affected if your loans are serviced by Granite State, FedLoan, or Navient.

Note: The loan servicer is the company that actually handles your payments, tracks account balances, etc. — it’s not the company that loaned you the money. So your interest rate, monthly payment, etc., won’t be changed by this. But it’s still important to know who your servicer is. 

If your student loan has been (or is about to be) transferred, you should have received word from both your original servicer and the new one. But we’ve all heard about how delayed mail service is.  That’s important because you want to make sure you’re sending your payments to the right place and that the payments you make are being correctly tracked. (Mistakes during a transfer are rare, but when tens of millions of accounts are changing, it’s smart to keep an eye on things.)

If you want you can double check which company is servicing your student loan. We’ve also got a resource that explains what a change in loan servicer means to you.

2. If you can, make a partial payoff

During the “pause,” many people who could afford to continue kept making payments. That’s smart because it allowed borrowers to take advantage of the temporary zero interest to help cut down your loan principal. If your balance is lower when repayment resumes, you’ll end up paying less interest overall.

Of course, not everyone could afford to do that. The pandemic wreaked economic havoc on lots of people — that’s why they paused payments in the first place. So, if the money you usually spent on student loans went to paying bills or building up your savings, those were smart financial moves, too.

That doesn’t mean you can’t still take advantage of that interest break — as long as you move fast. You’ve still got about five months until payments (and interest) resume. If you can make even a modest one-time payment, of say $500 (or smaller weekly payments of $50) before then, you can still benefit from cutting your principal. If you have any leftover stimulus cash, a year-end bonus from your job, or you get some cash gifts this holiday season, consider if it’s worth applying at least some of that to paying down your loan principal before repayments begin.

3. Rethink your budget

If you’re like most people with student loans, you took advantage of the payment pause to use that money in other ways: paying off other debt, building up your emergency or retirement funds, or maybe just paying for living expenses after a layoff.

All those moves made sense. But with payments resuming, you’ll need to adjust your budget to accommodate the “new” payment.

First, look for any “extra” money you have coming in. If you’ve recently gotten a raise or a better-paying job, consider applying the difference toward your loan payments. (For example, if you’re making $1,200 more per year than you were before payments were halted, that’s $100/month you should be able to apply to your loans without cutting into other spending.) You can do the same with any “extra” money you get, such as a bonus at work, big tax refund, or cash gifts.

There is no one-size-fits-all approach to budgeting — your financial needs are unique and what seems like a luxury to one person might be a necessity to another. We’re not going to tell you to give up your fancy coffee habit — if that’s the one treat you relish each day, go for it. But chances are, there’s some fat you can trim from your spending.

Common targets to reconsider when you’re looking at your spending: subscriptions, delivery services and their fees, cutting back on dining out (or finding cheaper alternatives when you do), and other nice-to-have but not necessarily needed items or services. Or maybe you have enough of an emergency fund now and it’s Ok to divert the money that was going there back toward your student loans. If you’re not sure where to start, track your spending for a month and see if there are areas where you’re spending more than you realized. If so, that’s a great place to start making some cuts. 

4. What if you can’t afford to start repaying?

For some people, looking at their budget will confirm that they still really can’t afford to pay their student loans. (If that’s you, don’t worry — you’ve got lots of company.) Nor are you without options.

A recent survey by Bankrate found that 75% of adults with student loans said the resumption of payments would hurt them financially. About half of the survey respondents said they’d need to find better-paying work or a side hustle to make their payments; another 32% said they’d cut back on other spending to make the payments.

Nearly 20% of borrowers don’t even have a plan for how they’ll start making payments in February.

If that’s you, you do have options. Consider one or more of the following:

• Loan consolidation — This process allows you to combine multiple loans into one. But it has both pros and cons and doesn’t work well for everyone. 
• Forbearance or deferment —These programs (which are similar but not the same) allow you to postpone some of your loan payments. But as you can guess, you have to jump through some hoops before you get the Ok. Check the links for more detail.
• Income-based repayment plans — These plans adjust your payment lower based on your current income. That means you don’t have to live on ramen and peanut butter to pay off your loans. On the other hand, you may end up paying more over the life of the loan. So whether this is a good idea depends a lot on your specific financial situation. 
• Refinancing — You can always try to refinance your loans to get better terms. While this is a great option for many, it does have some drawbacks depending on your unique circumstances. Research your options carefully.  

Might student loan debt get canceled?

Anything’s possible, but right now, it’s not looking like it — at least, not the large-scale cancelation of debt that some activists and politicians have been calling for.

Instead, the Biden administration has been making it easier for some borrowers to get all or part of their student loans forgiven through existing programs such as the Public Service Loan Forgiveness program. If you think you might qualify for loan forgiveness (or are close to it) check out this article that outlines the basics and who qualifies for them.

No one is looking forward to student loan repayments starting up again, but with a little planning and research, you should be able to make this adjustment without too much pain. And Nitro will keep looking for ways to help make it easier to pay back those loans.