What you need to know before you start making payments on your federal student loan again
In less than two months, one in five Americans are set to restart federal student loan payments. But interest resumes in just a few weeks.
Collectively, more than 43 million people owe the U.S. government more than $1.6 trillion in student loans - a debt that only keeps growing.
Many borrowers say they're not ready to start making payments again, especially with high inflation. But there are steps you can take to ease some of the burden a bit.
Here's what you should do before the interest begins Sept. 1 and how your employer might be able to help:
For student borrowers, the Supreme Court's ruling on student loan forgiveness was a heavy blow. But it's not a total loss. The Biden administration has already come up with a new plan called SAVE that could help a lot of borrowers.
"The new plan includes capping monthly payments based on a percent of your discretionary income, moving it from 10% to 5%. In addition to making it easier to qualify, certain loan forgiveness after a certain number of years," said benefits consultant Tom Kelly.
Biden administration to forgive $39 billion in student loan debts for 800,000 borrowers
Kelly says some companies are also now playing a bigger role helping employees with their student loans. To name a few, Google will match up to $2,500 of student loan payments every year for full-time employees. Aetna will match up to $2,000 a year.
Adidas offers full-time workers up to $100 a month, after the first year.
It pays for companies, too, in the form of write-offs.
"Through the CARES act, now employers can contribute up to $5,250 to allow employees to pay down student loan debt," Kelly added.
Some borrowers may consider lower interest rates, but this could end up costing you.
"People should be a little bit wary of refinancing their debt because if there aren't any kind of income-driven plan, they might lose those benefits. If they qualify for any student loan forgiveness through the governement, they might also lose those benefits," said Ali Hashemian with Kinetic Financial.
To help prepare to make restart payments, here are some steps to take before Oct. 1:
- Take inventory of what you owe and adjust your budget to match your payments.
- Re-certify or apply for an income-driven repayment plan.
- Pay off what you can now before the loans start accruing interest again.
- Automate payments to avoid late fees. Many lenders will also offer a reduction in interest rates if you enroll in autopay.
And most importantly, get educated.
"Making sure that you know all of your options and educating yourself on all your options is the best bet in my opinion," said Hashemian.
That doesn't just go for borrowers, but employers as well. The student debt debate and programs keep changing, and staying up to date could lead to big savings.
Join us every weekday morning on Eyewitness News at 5 a.m. for our new segment, ABC7 On Your Side. John Gregory has you covered on money-saving tips, including tricks to save on your bills, smart negotiating tactics, plus where you can score free stuff!
