There are several major unanswered questions about the student loan repayment restart. Will the Supreme Court side with Biden on one-time forgiveness? When will the restart actually happen? How big of a mess will the restart be?
One thing that we know for sure is that the restart will not be fun.
After a three-year pause from making payments, getting a bill will suck. Making matters worse, servicers will be swamped and struggle to provide quality guidance.
With this harsh reality in mind, borrowers should do what they can now to prepare for the restart.
Track Down All of Your Federal Student Loans
In an ideal world, servicers would mail out bills and give borrowers plenty of notice about amounts due and how to make payments.
We don’t live in an ideal world.
When repayment begins, many borrowers will discover that a different company is now managing their federal student loans. Some may find that they have to work with multiple federal loan servicers.
Tracking down your servicers now will help ensure you don’t get hit with late fees or have your credit report dinged.
The good news is that the federal government keeps a database of all federal student loans. Borrowers can pull up a list of all their current loans and contact info for the appropriate loan servicers.
If you haven’t touched your student loans in years, this is an essential step.
Be sure to update your contact information with your servicer. It might feel like you are doing them a favor, but making sure your contact info is up to date will ensure that you don’t miss any critical notices or bills.
Servicers don’t care if your bill gets sent to an old address. They will just charge late fees and report the missed payments to credit bureaus until you fix it. Keeping your contact information up to date avoids some significant headaches.
As for a Refund on Previous Payments
Some borrowers made elective payments during the payment and interest pause.
These same borrowers may now regret that decision. Asking for a refund could mean more loan forgiveness. Asking for a refund could also provide some financial flexibility when repayment resumes.
Borrowers don’t have to justify their request or show a financial hardship. They simply need to call their lender and request a refund on payments made after March 2020.
Make a Decision on Consolidation for FFEL Loans
Dealing with FFEL loans requires jumping through some extra hoops.
These loans are not eligible for some of the best repayment plans, and they do not qualify for PSLF. However, federal direct consolidation can fix some of these issues.
The downside to federal direct consolidation is that it can restart the progress towards forgiveness and, in some limited circumstances, cause borrowers to have higher interest rates.
Fortunately, borrowers have a one-time opportunity to consolidate their FFEL loans without losing progress towards IDR forgiveness. However, this chance ends on December 31, 2023.
Now is the time to figure out what you are doing with your FFEL loans.
Find the Best Federal Student Loan Repayment Plan for Your Needs
There are many different federal student loan repayment plans. Many of the names sound similar, but some subtle differences can make a huge difference in your budget.
If you are unfamiliar, now is a great time to learn the basics of federal repayment plans. If you think forgiveness is in your future, this guide will help you find the ideal Income-Driven Repayment plan.
Sherpa Tip: If your monthly payment is lower than the monthly interest on your student loan, pay special attention to the Revised Pay As You Earn Plan (REPAYE).
The REPAYE plan offers a generous subsidy to help keep monthly interest under control and stop your debt from spiraling out of control.
Ask Your Servicer Questions Now
If you are uncertain about any aspect of your loan repayment, call your servicer with questions now.
Waiting until the repayment restart will mean long hold times and limited help available. Worse yet, servicers may be understaffed, untrained, and overwhelmed. It’s a recipe for disaster. Borrowers who are not careful may get bad or incomplete guidance.
Call now before the servicers are under intense stress.
Make a Plan for Debt Elimination
The goal for student loan borrowers is to erase their debt.
Getting through the next month or year is important, but the most critical detail is developing a plan to get the balance to zero.
For some borrowers, that means picking the best forgiveness strategy. For others, it is about aggressive repayment.
We all have different financial circumstances, so there isn’t a one-size fits all approach. The key is to find a plan that will work for you now and into the future.