How To Plan For Student Loan Repayments (When They Keep Getting Delayed)

Navigating The Forever Limbo

A few weeks before the pandemic hit, I looked into refinancing my student loans. I was coming up on six months out of graduate school, which I’d paid for entirely with federal aid. But unlike with my undergraduate loans, this borrowed money was subsidized, meaning interest (and a lot of it) had started accruing since the funds hit my account in 2017.

By the time I graduated, I already owed a few thousand dollars on top of my principal balance. And with the deadline looming for my monthly payments to kick in at the start of 2020, refinancing into a private, low-interest loan was appealing.

Then March 2020 happened. The US government announced it would freeze all student loans due to COVID-19. I was relieved for the extension and for the pause on my accruing interest. I was also grateful when the government extended the pause on payments later that year. And then again in 2021.

“While student loan pauses were initially reassuring during a dark and challenging couple of years, the continued flip-flopping and furthered extensions have felt more like chaos than comfort.”

But while student loan pauses were initially reassuring during a dark and challenging couple of years, the continued flip-flopping and furthered extensions have felt more like chaos than comfort. Over the past 26 months, two administrations have yo-yo’d with borrowers’ emotions, offering a false sense of security—one day, they announce payment resumptions; the next, it’s another extension. This has happened multiple times (seven, to be exact).

We’re in a forever limbo of will we or won’t we have to pay our loans again. Despite the ongoing student debt forgiveness debate, we need to start talking about how to prepare ourselves for loan resumptions, whether or not they do in fact resume this fall.

1. Start putting money aside—now

I spoke with a handful of financial experts about preparing for student loan payments— and the number one shared piece of advice? Pretend like your loans are due right now.

“I recommend borrowers put away the money they would be spending on these payments,” says Melanie Hanson, the Editor in Chief of EDI Refinance. “Especially since there’s so much uncertainty about when and if student loan payments will resume.”

“This will get you in the habit of living with less each month and offer insight into whether you may need to refinance into a lower monthly payment.”

Even if you haven’t started setting funds aside—there is no need to feel ashamed for not saving money during the pandemic—student loan payments are not set to resume (supposedly) until August 31, 2022. Now is the perfect time to prepare for those payments. This will get you in the habit of living with less each month and offer insight into whether you may need to refinance into a lower monthly payment.

Alternatively, if you feel secure in your finances, it may be worth saving more money to pay towards your principal once loans resume—the lower your principal, the lower your interest rates will be, and the sooner you’ll be able to pay the loan balance off. Financial advisors recommend keeping these funds in your bank account (like in a separate savings account) until we know for certain that loans won’t be forgiven. You can then pay a lump sum later this fall.

And if loans do actually get forgiven? Well, Hanson recommends using the “[saved up] money to knock out a credit card balance, to start saving for a house, or to treat yourself to something nice.”

2. Update all the essential docs & check your payment plans

Many student loan borrowers will have a new loan servicer when payments resume (you can find out who currently owns your loan at StudentAid.gov). It’s a good idea then to log in to re-familiarize yourself with your principal loan amounts, interest rates, and current payment plans.

“Start preparing now,” says Anthony Martin, CEO of Choice Mutual. “When the moratorium ends, the system will likely be very overrun. Martin recommends ensuring your current information is up to date and accurate and ensuring you have the correct contact information for your lender. “This will allow you to get notices of the coming change.”

Next, go over your current payment plan. Have your life circumstances changed since you last made a payment? Evaluate all of your options in accordance with your current income and budget (more on that below), and start collecting and sending in necessary documents for adjustments as needed.

3. Look at your monthly budget & make adjustments as needed

Once you’ve figured out how much you’ll owe, set aside an afternoon to review your monthly budget. Start by evaluating your current spending, noting the larger payments like rent, car payments, or reoccurring bills.

“Starting to eliminate bad or unnecessary spending habits now can save you from having to make abrupt changes in the future.”

— Danielle Miura

“Depending on your future minimum student loan payment, you may want to consider moving to a more affordable place, changing your lifestyle habits, or finding a way to increase your annual income,” says Danielle Miura, a Certified Financial Planner and the founder and owner of Spark Financials. “Starting to eliminate bad or unnecessary spending habits now can save you from having to make abrupt changes in the future,” she adds.

Alternatively, depending on how aggressively you want to tackle your principle, now may be a great time to renegotiate your salary or look for freelance work.

4. Look into assistance options if needed

Patricia Roberts, the Chief Operating Officer at Gift of College, Inc. and author of “Route 529” recommends talking with your employer about possible assistance options if you are finding your forthcoming loan payments are too burdensome.

“Check with your employer to see if they would be open to providing student loan repayment assistance,” Roberts suggests, noting that, thanks to the CARES Act (2020) and Consolidated Appropriations Act (2021), employers can offer employees up to $5,250 per year in tax-free student loan repayment assistance.

“Some employers are not aware of this and may appreciate your bringing this to their attention, particularly at a time when employers are trying to avoid turnover and attract high-quality new hires,” she notes.

If you still believe you’ll be unable to make payments come September, contact your lender now to talk about income-driven repayments or consolidation options. “[You can also] request economic hardship or unemployment deferment. Forbearance is also an option to suspend payments, [though] interest will accumulate,” says Martin.

And if you’re a mental health professional (thank you!), be sure to check out these options for loan forgiveness.

5. Remember that you are not alone

Student loan payments are not only a financial burden, but they can be an emotional burden too, especially after the past two years; it’s entirely normal to feel anxious about the future. The reality is that many of us will be paying off student loans for years if not decades, and with ongoing inflation, it can feel incredibly overwhelming.

Know that you’re not alone. There are resources and professionals available to you if you’re struggling to cope mentally. Additionally, I’ve found it helpful to channel that anxious energy and my frustration about the $1.7 trillion dollar student debt crisis into further learning and actionable change. Check out the Student Debt Crisis Center (SDCC) for more information and to get involved.

“I’ve found it helpful to channel that anxious energy and my frustration about the $1.7 trillion dollar student debt crisis into further learning and actionable change.”

Kayti Christian (she/her) is a Senior Editor at The Good Trade. She has a Master’s in Nonfiction Writing from the University of London and is the creator of Feelings Not Aside, a newsletter for sensitive people.