For many borrowers, student loan payments have taken a backseat for more than three years. But the clock is ticking, and the moment to resume payments is rapidly approaching.
If you're worried about keeping up with payments or including them in your budget, we've pinned down six things you can do now to prepare for your first payment in October.
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1. Check on your finances
On average, student loan borrowers dish out $337 per month to keep up with their bill. If you're in the same boat, you'll need to look at your current budget to ensure you can make room for these extra payments.
For starters, find out how much income you have coming in and how much it costs to manage your lifestyle. If you're having a hard time making ends meet, consider doing the following to get back on track:
- Cut back on nonessential spending.
- Pick up a side gig to earn more money.
- Find ways to lower your tax burden.
2. Find out how much you owe
If you have federal student loans, log into your StudentAid.gov account to get your balance details. In 2023, the average student loan debt came out to $37,338. This is clearly a substantial amount, but having this information will help you create the best strategy to tackle your debt.
Before payments kick in, take the time to explore various repayment options, including:
- A standard repayment plan.
- Biden's new SAVE plan.
- A graduated student loan repayment plan.
3. Determine your student loan goals
If you want to avoid being burdened with student loan debt for decades, you'll need to stick to the standard repayment plan, which is 10 years.
Try to pay more than the minimum payment to accelerate your loan payoff date. If a windfall comes your way, such as a tax refund, you can funnel those extra dollars toward your principal balance.
However, if managing the minimum payment proves to be challenging, you can look into an income-driven repayment plan. While this option shrinks your monthly bill to a level that aligns with your income, it does come with the drawback of extending the length of time you'll be making payments.
4. Prepare for your first payment
Interest started accruing on Sept. 1, and payments restart in October. You'll have at least 21 days to submit your payment after you receive a notice from your loan servicer. To avoid juggling multiple financial obligations in October, it's a good idea to start saving money now.
For example, if your student loan bill is around $400, you can stash away $100 every week for four weeks to go toward your student loan bill. That way, you won't have to scramble to come up with a lump sum payment later.
5. Create an emergency fund
The last thing you want to do is accumulate additional debt while trying to repay your student loans. Setting up an emergency fund will help you stay afloat if an unexpected expense comes your way.
Also, having an emergency fund makes it easier to avoid tapping into your student loan funds to pay other bills. If you don't pay your student loan bills on time, you could be charged late fees and your credit score could take a hit.
6. Put your payments on autopilot
Managing your student loan payments on top of other financial responsibilities can be challenging. Setting up automatic payments can be your saving grace. Not only does it free up your time, but it can also save you money.
Currently, federal student loan servicers provide a 0.25% interest-rate discount when you enroll in autopay. While this discount won't make your student loan balance disappear overnight, it's worth considering it if you keep enough money in your checking account.
Let's say you owe $60,000 on federal student loans. The interest rate discount would save you $150 per year. You also won't have to worry about missing payments.
Don't let student loan debt get you down
It's normal to feel anxious about student loan payments returning in October, especially after a long hiatus. But with the right plan, you'll be able to ease your financial stress and crush your student loan goals. Start saving money now and you'll be ready to tackle your first payment before the deadline.
