As many readers of this website already know, borrowers of federal student loans have not needed to make student loan payments since the beginning of the COVID-19 crises. This has permitted student debt borrowers to focus their financial resources elsewhere, which has been helpful because layoffs and other financial disruptions as a result of the COVID-19 crises have negatively impacted millions of Americans. However, it appears as if the federal student loan pause will expire in January of 2022. If student debt borrowers keep a few things in mind, preparing for the student loan restart can be a little easier.
Pay a Few Months Ahead
One of the things that borrowers can do when preparing for the student loan restart is to pay off their loans a few months ahead of time. It might not be clear when the due date on debt will be once the pause on student loan payments expires. In addition, borrowers may be out of practice submitting payments to their student loan servicers since they have not had to make federal student loan payments in almost two years, and they may miss a student loan payment by mistake.
As a result, borrowers should consider paying student loans a few months ahead. This ensures that if there is some problem in submitting student loan payments, borrowers will likely not suffer financial consequences. This can also cut down on the amount of interest that is eventually paid on the debt and yield other advantages to student debt borrowers.
Have Cash Available
When preparing for the student loan restart, it is also important that individuals have cash available to make the payments. Many student debt borrowers invested excess money they may have pocketed from the student loan pause so that they could earn interest on such investments. This turned out to be a lucrative practice since the stock market and other investments have increased in value over the course of the COVID-19 pandemic.
However, student debt borrowers need to have enough cash on hand to pay their student loans month to month, and this can be a substantial shift away from investing excess money for the financial rewards. Borrowers should think about possibly selling assets to have cash available when they need to start making student loan payments again. If borrowers time things correctly they can pay as little taxes as possible and sell at the most opportune times to realize the greatest financial gain.
Update Autopay Settings
It is important when preparing for the student loan restart that the correct payment details be on file to timely submit student loan payments. Many borrowers use autopay and other similar features, which automatically deduct student loan payments from a borrower’s account and submits this to the student loan servicer. Such features are convenient since they allow student debt borrowers to submit payments automatically and reduces the risk that a borrower will accidentally forget to submit payment, resulting in negative financial consequences.
However, since it has been nearly two years since many borrowers needed to pay student loans, payment information for many may not be up to date. This can create difficulties in furnishing payment to student loan servicers, and borrowers may accidentally default on student loans even if they have money available to make payments. As a result, if you have changed banks or there is an update in your financial or personal information, you should provide the latest details to student loan servicers so payment is not interrupted. If people are proactive about checking on the status of their payment information, and updating such details as needed, they can help ensure that payment is timely submitted and they do not suffer negative consequences.
Consider Deferments
Another thing that should be considered when preparing for the student loan restart is to prepare if you are still not financially able to make student loan payments. Even though we are many months into the COVID-19 crises, millions of Americas are still in a financially precarious situation. The unemployment rate is far higher in the present day than before the COVID-19 pandemic, and many people are unemployed and underemployed either directly or indirectly due to COVID-19. In addition, people may have faced increased expenses due to COVID-19 because of childcare issues, healthcare expenses, and other costs.
It is important to make a plan if you are still unable to make student loan payments after the student loans pause is lifted. Many people can request a financial deferment if economic issues prevent student debt borrowers from timely making payments on their student loans. Borrowers may need to furnish information and materials in order to sufficiently prove that they are unable to make student loan payments due to economic issues in their lives. However, if borrowers are eligible for a deferment, this can dovetail nicely on the student loan pause and ensure that student debt borrowers receive the relief they need to deal with tough economic times.
In the end, the student loan pause has been a great resource to student debt borrowers and has empowered individuals to prioritize economic concerns other than student debt during this unprecedented time. If borrowers keep a few things in mind, they can prepare for when the student loan pause is lifted and receive financial protections if they need more time before they can make student loan payments like before the pandemic.