FGeneral student loans have been on hiatus since the pandemic began last year, but will resume on February 1, 2022. With an additional monthly expense to be expected, CNBC Select has given some tips to ease the transition to monthly payments again, in especially in situations such as retirement where monthly budgeting is of the utmost importance.
One of the very first steps is to make sure that your pre-existing loan provider is still to whom the loan payments are made. Amid the pandemic, many federal student loan providers chose not to renew their contracts, in which case another agency would have stepped in to take over.
âThe first thing borrowers should consider is who their loan manager is now,â said Mary Jo Lambert-Terry, managing partner of Yrefy, a lender specializing in private student loans. âThis information can be found at studentaid.gov. This piece is essential, as it is always a good idea to familiarize yourself again with who to send payments and what the payment amount is.
Once you’ve identified where to send the payments, making sure the lender has the correct, up-to-date address is the next step. All of this can be done through the same website; simply go to your profile and update your new information, or go directly to your lender’s website.
Once you understand the basics, it’s time to take a look at the monthly payment amounts. Determining the minimum monthly payments and whether they fit into your current budget is a must. If payments can be easily integrated into your current monthly budget, you may want to consider signing up for automatic payment.
If, however, because life circumstances have changed and the monthly minimum payment amount is now too high, there are options; one of these options is to subscribe to an income-based repayment plan that bases the minimum monthly payments on your income for the month. It is also important to verify your automatic payment enrollment, as it may no longer be suitable for your payment schedule and financial needs. Either way, if payments are a problem, contact your student loan officer to discuss options with them.
There are also options in repayment plans that you should be familiar with that vary from fixed monthly payments to extended repayment plans, and several varieties in between. The studentaid.gov website has a full list of options, and as you restructure your new monthly budget to accommodate student loan payments, it’s important to be aware of these options.
Finally, there are options for the loan itself if you find yourself in debt or have higher interest rates than desired. If you have multiple loans that you pay off monthly, consolidation might be a viable option.
âIf you have multiple loans and want to reduce it to one payment, there are federal consolidation programs available,â Lambert-Terry said. “So if you have graduate loans and undergraduate loans, you can do a consolidation federally, and that will lower your monthly payment and extend your term, and you won’t have a prepayment charge to pay off. the loan sooner. “
Alternatively, if you are currently stuck on a higher interest rate, it is possible to refinance a federal loan. Borrowers should be aware, however, that refinancing makes your loan private and therefore means that it will not have federal protections for student loans; these include the ability to withhold payments for various reasons, such as starting school or becoming unemployed.
âBe proactive and take a look at your options right now,â Lambert-Terry warned. “We are encouraging people to look at this now, because the closer we get to January 31, 2022, the busier repairers will be.”
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