Students & Student Loans

What steps can I take now to prepare for payments to restart in October?

1. Log into your student loan account

The first step is making sure that you know where your loans are (i.e. who your loan servicer is). Your loan servicer may have switched within the past few years when the Department of Education’s contracts changed. If you don't know who your servicer is, log into StudentAid.gov and scroll down to the "My Loan Servicers" section. Once you’ve confirmed who your servicer is, confirm that you can log into your online account. Don’t wait on this—you don’t want to be trying to get your servicer on the phone right before your payments are due.

2. Update your contact info

If your email address, mailing address, or phone number has changed within the past few years, enter your updated contact information. This ensures that your servicer can communicate with you about when your payments will be due and how much they will be. And yes, you are responsible for your student loan payments whether or not your servicer can find you.

3. Find out how much your payment will be

If you've had to make payments in the past, you may be able to find out how much you were paying by looking back through your student loan account. If not, or if you have never had to make payments, you should contact your loan servicer to find out how much your payment will be so you can start to prepare. You can also use the loan simulator to explore your repayment options and estimate your payment.

4. Practice your payment

Once you get an estimate of your payment, start saving this amount monthly into a separate savings account to practice the payment until they officially resume. This will help you adjust to your new budget in advance and reduce last-minute stress when the payments become due. That may require you to take a close look at your current spending and savings to determine where you can make changes to fit that payment in.

5. Set up automatic payments

If you had automatic payments before the pandemic, you’ll need to set it up again even if you are still with the same servicer. If you are new to paying student loans, setting up auto-pay will ensure that you don’t forget to make a payment!

Is there anything I can do to lower my student loan payment?

Depending on your situation, switching to a different repayment plan could reduce your monthly payment. All federal student loan borrowers start off on the standard ten-year repayment plan. If you can afford these payments while still saving and avoiding credit card debt, you may want to stick with this plan because it will allow you to pay your loans off the quickest while paying the least amount of interest.

If not, contact your student loan servicer to review your options for other repayment plans. To get an idea of what might make the most sense for you, you can also use Federal Student Aid’s loan simulator to get a preview of your potential options. These may include:

Income-Driven Repayment Plans: For most people with low-to-mid-range incomes, an income-driven repayment plan is the best option for reducing the payment amount. Your payment will be between 10%-20% of your “discretionary” income (and as low as 5% once that part of the SAVE plan is implemented). While you might think of your “discretionary” income as money left over after you pay your bills, the Department of Education actually defines it as your gross income minus 150% of the federal poverty level. On the SAVE plan, it will be defined as your gross income minus 225% of the federal poverty level. As of 2023, the federal poverty level is $14,580 for an individual.

Extended Repayment Plan: The extended repayment plan gives you a longer term to repay your loans (up to 25 years), which reduces the payment compared to the standard repayment plan. This may be an option for high-income earners seeking a lower payment.

Graduated Repayment Plan: With a graduated repayment plan, your payment starts out low but increases every two years. This could be an option for someone who feels confident that their income will increase enough to keep up with the growing payments.

Consolidation might also be an option for lowering your payments while remaining on the standard repayment plan because it restarts a new ten-year period. This will stretch out your payoff timeline which reduces your payment but also increases your total interest paid.

For private student loans, you may be able to reduce your payment by refinancing to either get a lower interest rate (most ideal but not always possible) or extend your repayment timeline.

What if I can't afford to start making payments right now?

First, make sure that you explore all options for lowering your payment (such as an income-driven repayment plan) before assuming you can’t afford it. If you’ve assessed your income-driven repayment options and still don’t think you can afford to start paying right away, it’s not the end of the world. For 12 months after student loan payments restart, your servicer will not report your missed, late, or partial payments to the credit bureaus meaning you won’t feel the typical worst impacts of not paying your loans. However, interest will still accrue on your loans, which may actually lead to a higher payment once they restart if you aren’t on an income-driven repayment plan, so it’s still a good idea to enroll in the SAVE plan in the meantime.

What is the SAVE plan and how can I enroll?

The SAVE repayment plan is billed as a new income-driven repayment plan for federal student loan borrowers that will offer the lowest monthly payments. It will replace the REPAYE plan, which is currently the most used income-driven repayment plan.

The SAVE plan has some major improvements over the current income-based repayment plans.

Lower payments: The SAVE plan will offer the lowest payments of any of the income-driven repayment plans because it will exempt more income from factoring into your payment amount. It will also reduce the income percentage that undergraduate borrowers need to pay from 10% on the REPAYE plan to just 5% on the SAVE plan. Borrowers with a mix of undergrad and grad loans will pay somewhere between 5%-10% of their income toward their loans. The income percentage reduction is not expected to be implemented until July 2024.

Loan balance will never increase: As long as you make your monthly minimum payment, unpaid interest will not be charged meaning that your balance will never grow due to interest.

Anyone who is already enrolled in the REPAYE program will be automatically enrolled in SAVE once the plan is up and running. If you aren’t on the REPAYE program yet, you can enroll or switch to it now. You can find out which repayment plan you’re currently on through your StudentAid.gov account.

I haven't made student loan payments in a long time (even before the pandemic). Should I start making payments now?

If you went months or years without paying your student loans before the COVID forbearance, there is a good chance your loans are in default. Getting out of default has never been easier than it is right now with the Fresh Start program. By enrolling in the program, your loans will immediately be considered in good standing. (It takes 9 monthly payments before your loans are considered current under the regular loan rehabilitation process).

The Fresh Start program has several benefits for borrowers in default:

Credit boost: It will bring your loans “current” and remove the negative mark of “in collections” from your credit reports. This will likely boost your credit score.

Stop collections: It will stop any collection efforts including collection calls, wage garnishment, and the seizure of tax refunds.

More than one shot: It will not count as your one chance to rehabilitate your loans. This means that if you have tried and failed to rehabilitate your loans before, you can give it another shot. If the Fresh Start program is your first time rehabilitating your loans but you go back into default, you’ll still have another chance. Either way, you’ve got nothing to lose!

Access to aid: You will get access to federal student aid if you are trying to go back to school or pursue another degree.

You need to contact your loan holder to find out if you qualify. If you don’t know who holds your loans, you can call 1-800-621-3115. If your loans are held by the Department of Education, the easiest way to enroll is online at myeddebt.ed.gov or by phone at 1-800-621-3115. If your loans are held by a guaranty agency, you can find their information here on Federal Student Aid.

Could I qualify for any of the forgiveness programs out there?

Since the Biden administration’s student loan cancellation policy was struck down, you may be wondering whether you have any other shots at forgiveness. Currently, the two main forgiveness programs are Public Service Loan Forgiveness (PSLF) and income-driven repayment.

PSLF: Public Service Loan Forgiveness (PSLF) is only for borrowers who work for non-profits or governmental agencies. You need to make 120 qualifying payments (10 years) and certify that you worked for an eligible employer each year. Use the PSLF Help Tool to look up whether you work for an eligible employer and start the PSLF process.

IDR: Borrowers are eligible for income-driven repayment after they make payments on their loans for 20 or 25 years (how long depends on the type of your loans). If you’ve read headlines lately about 800,000 borrowers becoming eligible for forgiveness, that is through the one-time account adjustment being made to the payment count of some borrowers on IDR plans. Borrowers on this path should be aware that historically, the remaining balance on your loans is considered taxable income when it’s forgiven. There is an exception in place through 2025.

Less common forgiveness and discharge possibilities include:

• Teacher Loan Forgiveness
• Borrower Defense Loan Discharge
• Closed School Loan Discharge
• Disability Discharge
• Bankruptcy Discharge (in some cases)