Federal student loan payments restart in October, and after three and a half years, many borrowers will feel the burn of having to make another monthly debt payment when the hiatus ends. Fully 38% of federal student loan borrowers say they’ll need to significantly change their budget in order to accommodate student loan payments, according to an August survey by NerdWallet.
But, Palmer explains, when that on-ramp expires, the consequences of not paying become more severe. “You could potentially face delinquency, default, a tanked credit score and ineligibility for further federal student aid. Collections could garnish your tax refunds, social security benefits and wages,” says Palmer.Figure out your loan servicer, what you owe, and how you can pay — ASAP. A lot has changed loan-wise over the last three-and-a-half years.
“Average student loan debt at graduation for a Bachelor’s degree is $30,368 with 60.8% of Bachelor’s degree recipients graduating with debt, based on the 2019-2020 National Postsecondary StudentAid Student,” says Kantrowitz. Meanwhile, the National Association of Colleges and Employers reveals the starting salary for the class of 2021 was $55,911. “Most Bachelor’s degree recipients will be able to repay their student loans. If there’s a problem, it’s due to other expenses, not the student loans.
There are many programs available to help borrowers repay student loans or have them forgiven altogether. “One of the most well known is the Public Service Loan Forgiveness plan for nonprofit or government employees. Others are run by states, usually for specific professions like medical professionals, lawyers and teachers and if you qualify, they’ll pay some of your student debt in exchange for your agreeing to work in a high-need area,” says Kitchen.
Sign up for autopay. One thing you can do to minimize the impact of impending student loan payments is sign up for autopay. “The monthly payment amount is automatically transferred from your bank account to the lender and you’ll qualify for a 0.25% percentage point interest rate reduction,” says Kantrowitz.