Enrichment Education

How to prepare for the end of the student loan payment pause

A borrower could increase their income by looking into a side-gig, asking their employer for a raise or by finding a new job altogether, one expert said.

Story at a glance

  • Experts say there are steps student borrowers should take to prepare for the start of the repayment period even if there’s another extension or some form of loan forgiveness. 

  • “Budget for the restart of repayment by reviewing your budget to find where you can cut, and maybe start saving that amount to ease into the restart of repayment,” one expert said. “If you don’t have expenses you can cut, look into increasing income.” 

  • “Assume that you’re going to have to start making payments again, and plan for that,” another expert added.

President Biden’s latest extension of the student loan payment freeze gave millions of borrowers a little more time to ready themselves for eventual repayments, but experts say there are steps borrowers should take to prepare even if there’s another extension or loan forgiveness.  

The student debt crisis has left roughly 43 million borrowers with $1.7 trillion in collective debt. This has led to growing calls from progressive Democratic lawmakers and advocates for the president to consider widespread loan forgiveness – a decision Biden recently discussed publicly. 

“I am considering dealing with some debt reduction,” Biden said in late April. “I am not considering $50,000 debt reduction, but I’m in the process of taking a hard look at whether or not there will be additional debt forgiveness and I’ll have an answer on that in the next couple of weeks.”  

A recent analysis from the California Policy Lab showed that the average loan debt of borrowers included in the pause is around $36,800. About 31 percent of borrowers owe $10,000 or less.  

Yet experts suggest Americans holding student debt prepare for repayments now, even if they expect another extension of the pause or some form of loan forgiveness.  

Student loan expert Mark Kantrowitz recommends borrowers update their contact information, so they can receive important updates on their payment amounts, due dates and the eventual end of the moratorium. A borrower might consider setting up autopay by supplying critical banking information, he added. 

Next, a borrower should evaluate their budget.  

“Budget for the restart of repayment by reviewing your budget to find where you can cut, and maybe start saving that amount to ease into the restart of repayment,” Kantrowitz said. “If you don’t have expenses you can cut, look into increasing income.”  

The average monthly payment for a person holding a bachelor’s degree in the U.S. is $448. Payments for master’s degree recipients, however, average nearly $700 per month.  

A borrower could increase their income by looking into a side-gig, asking their employer for a raise or finding a new job altogether, Kantrowitz said.  

Kantrowitz emphasized the importance of these actions, although he thinks that this will not be the last extension of the repayment pause.  

“Do this now,” he said, “even though this is probably not the last extension to the payment pause and interest waiver.” 

Kantrowitz is not alone in his view that borrowers should use this time to get ahead. Given the administration’s goal to provide some form of loan forgiveness as well as a plan to allow borrowers to reenter the payment period in good standing, experts say it is unlikely payments will resume in September.  

“The administration has also announced a host of waiver programs and reforms meant to correct for historic (and current) failures in the system,” Sarah Sattelmeyer, project director for education, opportunity, and mobility in the Higher Education initiative at New America told Changing America. “Borrowers should make sure they are taking the steps needed to access these programs.” 

Biden’s latest extension of the payment freeze offered borrowers currently in default a “fresh start” once payments resume. The “fresh start” would not actually forgive debt, but it would cut off penalties imposed on borrowers that could help them pay their bills and help restore their credit.  

Before the pandemic, millions of borrowers were in default or delinquent on their student loan payments. This can trigger collection fees, negatively impact credit scores and lead to wage garnishment to pay back the loan.    


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Both Kantrowitz and Sattelmeyer advise pursuing options for income driven repayments or additional forbearance, if borrowers are still struggling financially. 

Borrowers might take advantage of the recently overhauled Public Service Loan Forgiveness (PSLF), which was designed for public service workers to have their loans forgiven after ten years of employment.  

Some reforms include allowing all payments made by qualifying borrowers to count toward PSLF regardless of loan type or payment plan. Military service members and federal employees also began receiving credit towards PSLF automatically through federal data matches.   

Additionally, the Education Department began reviewing previously denied PSLF applications for errors and gave borrowers the opportunity to have their PSLF determinations reconsidered.   

Still, some experts argue that student loan borrowers, especially those who maintained employment during the pandemic, could have been much better off had they used the time to either make payments or save for the eventual restart.  

“Assume that you’re going to have to start making payments again, and plan for that,” said Sandy Baum, a senior fellow for the Center on Education Data and Policy at the Urban Institute.  

“If you don’t have to make it, great,” Baum continued. “It just doesn’t make any sense to be shocked that this debt you actually have you’re going to have to start paying.”


READ MORE STORIES FROM CHANGING AMERICA 

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HERE’S HOW BIDEN HAS TACKLED STUDENT LOAN DEBT SO FAR 

AMENDMENT IN FLORIDA BILL TO ‘OUT’ STUDENTS IS WITHDRAWN 

EDUCATION DEPARTMENT TO ERASE $415 MILLION IN STUDENT LOAN DEBT FOR NEARLY 16,000 BORROWERS