Student loan payments are resuming for the first time since the spring of 2020. Are you ready for those payments to kick back in?
The first payments will be due in October, so if you’re one of the 28 million borrowers who will be making payments, now is the time to get prepared.
Here are some ways to get ready, and possibly cut down on the amount you’ll owe each month:
Look into the SAVE Plan for Student Loan Payments
The Saving on a Valuable Education, or SAVE Plan, is a new income-driven repayment plan that considers your income amount and family size. It has replaced the Revised Pay As You Earn (REPAYE) Plan, and it’s available to almost all student loan borrowers.
This plan increases the income threshold significantly, up from 150% to 225% of the poverty line. That means that single borrowers earning $32,800 or a family of four earning $67,500 or less will not owe loan payments. For borrowers earning more than that, their amount owed will still be at least $1,000 less than with the previous income-driven repayments plans.
The SAVE Plan also eliminates any remaining interest for subsidized and unsubsidized loans after a scheduled payment is made. So as long you make your monthly payments, your amount owed because of interest will not increase.
Regardless of how much you make, it’s worth applying for the program to see what you might be eligible for. You can apply for the SAVE Plan here.
Keep in mind that when you apply for the SAVE plan, you might have to apply for income certification at the same time. So if your income certification is not until next year, you can wait until next year to apply for the SAVE Plan.
Know Your Servicer
Before your payment is due, make sure you know who your loan servicer is. Since payments were paused during the pandemic, many borrowers had their servicer changed. You should be receiving emails from your servicer about payments resuming, but if not, check the steps listed here to determine who your current loan servicer is.
Understand Your Payment Plan
Now is the time to get reacquainted with how much money you owe, how much you’ll be paying monthly, and what kind of payment plan you’re on.
Again, the SAVE plan could have benefits for everyone, so you might want to apply. But even if you’re not on the SAVE plan, there are many other options for paying back your loans.
Look into what your payment amount will be, and how it will fit into your budget. If it’s too high, look into your options and see if you can get it reduced. Or, try to rework your budget to make more room for those payments.
Doctors, you can check out our post about paying back your loans.
Prepare to Pay
If you haven’t paid your loans in a few years, it can be difficult to get back in the habit of making those monthly payments. For many borrowers, setting up automatic payments is an easy way to make sure you don’t miss a payment.
(Bonus: For many servicers, setting up automatic payments will get you a 0.25 percentage point reduction on your interest rate. Check with your servicer to see if you’re eligible for that reduction.)
You can also review your budget and make room for the new payments. Check out my post about improving your budget here.
About Your Richest Life
At Your Richest Life, physician-focused financial planner Katie Brewer, CFP®, wants to help you build a successful financial future. For more information on the services offered, contact Katie today.