The Student Loan Freeze is Melting — 5 Tips to Get Ready
The era of paused student loan payments is coming to an end. With the current freeze set to melt away on September 1st, it’s time to start preparing now before payments thaw out.
What’s Next for Student Loan Repayment
The interest-free federal student loan forbearance season that started in 2020 is now set to expire on September 1, 2023 and once the freeze ends, close to 44 million borrowers will have to restart making payments. For those fortunate enough to have extra funds, you have about two weeks left to make a payment and chip away at your principal, interest-free. It’s a prime opportunity to get ahead before rates thaw and start accruing again. Of course, sticking your head in the sand and ignoring the impending due date is an option too. But interest will be back soon, so best to use this small window wisely while you can.
President Biden recently announced a year-long “on-ramp” period, meaning you won’t default on any federal student loans if you can’t make payments for 12 months and late payments won’t be reported to credit bureaus for a while. That said, you’ll still accrue interest on that unpaid balance, so proceed with caution. Your exact restart date depends on your loan servicer. Make sure your contact information is up to date so you get notices!
5 Tips to Get Ready for Payments to Resume
Here are 5 things you can do now to prepare for student loan repayment:
- Update your contact info and auto-pay. Avoid disruptions or billing errors by ensuring your loan servicer has your current address, email, and bank account. Set up autopay if possible to prevent missed payments.
- Review your budget. See how resuming loan payments will impact your monthly cash flow. Trim expenses if needed to accommodate the added cost.
- Check your repayment plan. Contact your servicer to see if you still qualify for income-based repayment plans with lower payments. Adjust if needed.
- Build your emergency fund. Try to have at least 3–6 months of loan payments available in savings to handle any income disruptions.
- Explore other options. See if refinancing student loans could lower your interest rate. Or look into targeted forgiveness programs you may qualify for.
Pull offers access to up to 6 months of your salary in advance at affordable costs, so worth looking into an interest arbitrage opportunity if you have a high interest on your student loan.
The student loan freeze provided temporary relief, but it’s almost over. Avoid being caught off guard by making a repayment game plan today.