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How to prepare for the return of student loan payments

Get ready now to resume (or start) paying back your student loans.

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Allie Volpe is a senior reporter at Vox covering mental health, relationships, wellness, money, home life, and work through the lens of meaningful self-improvement.

More than three years after student loan repayments were paused due to the Covid-19 pandemic, borrowers will soon receive their first bill since early 2020. With the Supreme Court’s 6-3 ruling striking down Joe Biden’s debt relief planwhich would have canceled up to $20,000 in debt — and the debt ceiling bill preventing any future pauses on payments and interest without congressional approval, those with federal student loan debt will see no further relief: Payments will resume later this summer. Be prepared for when they do and to enroll in income-driven plans so you’re not faced with an unruly initial payment.

Payments remain paused until 60 days after June 30, 2023. Interest will begin accruing on September 1, and payments will begin in October. The US Department of Education will inform borrowers at least 21 days before payments restart. This notice will also include the payment amount and due date.

Student loan servicers are anticipating customer service issues at the onset of resumed payments, so getting your ducks in a row now may help prevent frustration come fall. Advance planning will also help you determine if your loan servicer has changed, get ahead of tax preparation, and, most importantly, set a budget. Not paying your monthly bill on time will affect your credit score, which can impact your ability to purchase a home or a car. According to recent research from VantageScore, a credit score model development company, 34 to 76 percent of borrowers may miss their next required federal student loan payment, resulting in a decline in their credit score. Those resuming payments will only see a 1 to 8 point increase in their credit score, while those unlikely to pay could see their credit scores decrease between 49 and 82 points, within a month of resumed repayments.

“Always make a plan today that is based upon what you know today,” says Scott Buchanan, the executive director of the Student Loan Servicing Alliance, a nonprofit that focuses on student loan servicing issues. “Not hypotheticals that might happen, what the government may or may not do in the future. If that changes in the future, and there’s new information that comes along, you can adjust your plan.”

Whether you just graduated and haven’t begun paying back your loans or will soon resume repayment, here’s what you should keep in mind to prepare.

How do I pay back my student loans?

You’ll begin, or continue, paying your loans through your student loan servicer’s website — the company that handles the billing for the loan. This is most likely the same servicer you were using to pay your loans prior to the shutdown. However, several servicers — Navient, the Pennsylvania Higher Education Assistance Agency, Granite State Management and Resources, and Great Lakes Higher Education Corp. — ended their contracts with the Education Department or were acquired by another servicer, meaning you will have a different company and online portal for your loans if you previously used those servicers. Whether you’re just starting to pay off your loan or had a switch from an old servicer, you’ll be notified by the servicer. Some borrowers who are being transferred to a new servicer will have to create new online accounts, Buchanan says, and others won’t have to take any action with their new servicer — just pay attention to emails and letters from your servicer and follow instructions.

To find out your servicer, log in to your Federal Student Aid account and find the “My Loan Servicers” section or call the Federal Student Aid Information Center at 1-800-433-3243. The current list of student loan servicers includes Edfinancial, Mohela, Aidvantage, Nelnet, OSLA, ECSI, and Default Resolution Group.

Once you’ve determined your loan servicer, log in to your account and make sure your contact information is up to date — your email, phone number, and address — especially if you’re anticipating a transfer to a new servicer. Even if you accidentally make a payment through your old servicer, it will automatically be forwarded to your new one, Buchanan says.

Review your banking information. If you enrolled in auto-debit prior to March 2020, you’ll have to opt in to auto-debit again. Anyone who signed up for auto-pay or continued making payments throughout the shutdown doesn’t have to make any updates to their billing info. Buchanan advises calling your servicer as soon as possible if you have any questions while setting up an account or choosing a payment plan. “Given the budgetary constraints that the federal government and the Department of Education are under and, frankly, the sheer volume of people in this unprecedented return to repayment,” Buchanan says, “if everyone calls us on September 1, we’re going to have a lot of heavy call times and call hold times, and payment and processing could be delayed.”

How do I check my student loan balance?

Since you accrued no interest since the pause began, the amount you owe should remain the same. (That is, unless you made payments during the pause.) When you log in to your account on your loan servicer’s website, you can see how much you owe and how much you will be expected to repay each month. “Nothing practically has changed in terms of monthly payment amount for borrowers in general,” Buchanan says.

The Education Department has an online loan simulator that helps you calculate your monthly payments and provide options for lowering that amount. You can log in to your Federal Student Aid account and the simulator will show you different breakdowns under various repayment plans based on what you owe. You can compare different plans side by side to see the differences in monthly payments and interest accrued overall.

What if I can’t afford the monthly payment?

Unless you choose otherwise, all borrowers are placed on a standard repayment plan, which means you pay a fixed amount of at least $50 every month for up to 10 years. There are other payment plans if the standard monthly payment is too high for you. Through your loan servicer, you can opt for a graduated repayment plan, which starts with lower payments that increase every two years, or an extended repayment plan where you can pay off your loan in 25 years if you have more than $30,000 in loans. Keep in mind you’ll end up paying more in the long run with these options.

You can also choose an income-driven plan where your monthly payments will be 10 to 15 percent of your discretionary income (defined as the difference between your annual income and 150 percent of the poverty guideline for your family size and state of residence). Repayments are recalculated each year based on your income and family size. If, after 20 years, you haven’t paid off the loan for your undergraduate schooling, the outstanding balance will be forgiven. You can apply for an income-driven plan online. If you were already enrolled in an income-driven plan, you’ll still be enrolled in the same plan but you’ll need to recertify your current plan by providing updated information about your income and family size in about six months, Buchanan says. However, if your family size has grown or your income has decreased dramatically, it’s worth recertifying your plan now in order to get a smaller monthly payment.

Start putting aside money now

Once you’ve determined what your monthly student loan payment will be, start putting that money aside now, before payments resume, Buchanan says. “Pretend that the resumption has already occurred,” he says. If your bill is $200 a month, put that $200 aside mentally or in a savings account and see how this impacts the rest of your monthly budget. Should you struggle to pay your other bills in this hypothetical situation, consider looking into an income-driven plan.

Don’t throw away important tax information

When you pay $600 or more in student loan interest, your loan servicer will send you an IRS Form 1098-E by the end of January. If you paid over $600 in interest for the 2023 tax year, you’ll get that form in January or February 2024. Save this for your tax preparation purposes.

Be aware of student loan forgiveness scams

Any unsolicited call or email promising loan forgiveness or to lower your monthly payment for a fee is a scam. Don’t give money to anyone other than your student loan servicer. If you’re unsure whether a call is coming from your servicer, hang up and call the customer service number included on your bill. Any customer service provided by your loan servicer, whether it’s enrolling you in an income-based plan or answering questions, is available for free.

Update, June 30, 11 am ET: This story was originally published on June 12 and has been updated to reflect the Supreme Court’s ruling on Biden’s student loan plan.

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