As the fall season approaches, many parents are experiencing the usual back-to-school frenzy while also gearing up for the resumption of monthly student loan payments. After more than three years of reprieve due to the pandemic, student loan payments are set to recommence shortly, with interest charges kicking in on September 1st and the first payment due in October. According to data from the Education Data Initiative, the average student loan debt stands at over $37,000, with a typical monthly payment around $500. Scott Buchanan, the executive director of the Student Loan Servicing Alliance, emphasizes that while adjusting to this financial change will be challenging for many, early preparation is crucial.
To assist you in navigating the new landscape of student loan repayment, we’ve spoken to three experts. Here are nine essential actions parents with student loans should take before October. Hope this helps.
Verify Your Loan Information: Before September 1st, log in to your student loan account on studentaid.gov. Check if all your contact information (email, address, phone number) is accurate and confirm if your loan servicer is the same. Due to changes during the pandemic, some major loan servicers may no longer handle federally owned student loans. Identifying your current servicer is a vital first step in this process.
- Choose the Right Repayment Plan: Once you’ve accessed your studentaid.gov profile and confirmed your loan servicer, determine your monthly payment amount, which can vary based on your chosen repayment plan. If you anticipate difficulties with payments, consider income-driven repayment plans, which may offer more affordability and potential loan forgiveness after a certain period. Be aware that some repayment plans have changed over the past three years, so stay informed about any modifications that affect your loan.
- Consider Automating Payments: If you previously used auto-debit for loan payments, be aware that the Department of Education will not automatically renew this service. Take proactive steps to set up auto-debit again if it suits your preferences. Conversely, ensure that payments are not deducted automatically if you do not intend to use this method.
4. Explore the Fresh Start Program: If you were in default before the pandemic pause, consider the Fresh Start program designed to assist borrowers in default to reestablish their repayment plan. This program can help you avoid involuntary collections and get back on track with income-driven repayment plans.
5. Address Parent Plus Loans: If you have Parent Plus loans, which are loans taken out to support your child’s education, consider consolidating them or enrolling in income-contingent repayment plans. You can also explore the option of double consolidation for potential benefits.
6. Capitalize on Biden’s IDR Account Audit: Although the comprehensive student loan forgiveness plan was scaled back, the Biden administration is conducting a one-time audit of income-driven repayment (IDR) accounts to help borrowers get closer to forgiveness. To be eligible for this adjustment, consolidate older loans (e.g., FFEL) into a direct loan before the December 31, 2023 deadline.
7. Don’t Procrastinate: Start the process early and don’t wait until the last minute to address your student loan situation. Millions of borrowers will be navigating this process, and early action can help you avoid potential delays or complications.
8. Don’t Rely Solely on Debt Forgiveness: While debt forgiveness is being explored, don’t base your financial planning solely on hypothetical scenarios. Focus on your current financial situation and budget accordingly.
9. Beware of Scams: Exercise caution regarding potential scams. Scammers often target vulnerable borrowers during times of financial uncertainty. Verify the legitimacy of any company offering assistance with your student loans, and do not provide financial information to unsolicited callers.
By taking these proactive steps, parents can better prepare themselves for the resumption of student loan payments and navigate the changing landscape of student loan repayment. Stay informed, stay vigilant, and stay on top of your financial situation.
By Danny Reyes
Photo 1 by Unseen Studio
Photo 3 by Towfiqu barbhuiya