The student loan repayment clock is ticking. Come Aug. 30, millions of borrowers should expect to start shelling out money toward student loan payments again.
If you're like the average borrower, you'll have to make room in your budget for about $337 worth of student loan payments every month. But even if your tab is smaller, it could still end up being a large chunk of your paycheck, which could be a shock to your finances.
Luckily, there are still a couple of months to plan ahead to make sure you aren't caught off guard when payments resume. We've pinned down two things you should know to help you create a solid plan.
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1. Student loan interest will resume soon
Interest is the price you pay for borrowing, and it's no different when it comes to student loans. No matter what type of student loan you have, there is typically an interest rate tied to it that will determine how much you'll end up paying for your debt at the end of your loan term.
But ever since March 2020, many borrowers haven't had to worry much about interest rates. When the government froze student loan payments, they also temporarily dropped interest rates on qualified loans to 0%. However, that interest-free student loan period is about to expire.
Beginning Sept. 1, 2023, interest will begin accruing on student loans. Regardless of whether you make payments, the interest on your student loans will still accrue. This means you could see a drastic increase in your overall student loan balance over time, depending on your interest rate.
For many borrowers, interest rates will revert to what they were before the pandemic. If you have no idea what your exact interest rate will be after the payment pause, it's a good idea to reach out to your loan servicer to get the details.
2. Student loan payments will be due starting in October
Although interest on student loans starts accruing in September, you'll still have a few weeks after that to get your payment together. Payments will be due starting in October, according to the Department of Education. That gives borrowers roughly two months from now to prepare for their first payment.
In the past, borrowers have had their deadline for payments pushed back. Chances are slim that the payment pause will be extended, since Congress passed a law preventing additional delays.
Now is a good time to make room in your budget for student loan payments. You can get started with your next paycheck. Set aside the amount you think you would need to pay on your student loans during the month. This might put you in a financial rut if that money was earmarked for something else.
That means you may have to find ways to decrease your expenses or increase your income so you can handle your student loan payments with ease. Essentially, you are using your next paycheck to determine how student loan payments may impact your budget and lifestyle.
Prepare for the return of student loan payments
Shelling out cash toward student loan payments can be quite an adjustment, since payments have been on pause for three years. It's probably even more of a transition for those who never paid a student loan bill before.
But now that you know interest rates are going back to normal and student loan payments will be due soon, you can make the necessary moves to crush your student loan goals.
