Get ready to pay your student loans
ROCHESTER, Minn. (KTTC) — In just over two months, federal student loan repayments will resume after being paused for nearly two years.
The federal government has extended the moratorium four times since March 2020. It says the extensions are now over.
The Federal Reserve estimated that Americans owed more than $1.7 trillion in student loans in the third quarter of 2021. That averages out to an average of $37,172 in loan debt per student.
“I think the biggest indicator, if you’re successful at budgeting and therefore preparing for student loan repayments, will simply be how long you spend on it,” financial planner and founder of Pulse Financial Planning says Matt Elliott.
There are three options for repaying your federal loans. The first is to keep existing payments as long as they fit your budget. The second is to enroll in an income-driven repayment plan.
“What that will do is potentially lower your monthly payment based on your income, so if you’re on a standard payment plan right now that’s really going to impact your budget,” Elliott said.
The third is to refinance your federal loan into a private loan which could potentially lower your interest rate, but you could not benefit from federal breaks like the recent moratorium.
“You will not be able to receive these benefits because your loan will no longer belong to the Department of Education,” Elliott said.
Some students will be making student loan repayments for the first time.
“I’m definitely not paying the full amount right away, even if I have that amount of money, I plan to say as much as I can,” said recent graduate Reed Carpenter.
“I had drained a good chunk of my savings to pay for college so I wouldn’t have to take out as many loans, but now that I have to start paying my loans again, my savings will run out,” recently graduated Kat. Scotting said.
With the end of the moratorium, are students ready to start making payments?
“I understand that for many other people who are not in this situation that I find a job right out of university, it is very beneficial. For me it’s a good treat, but for others it’s really life-saving,” Carpenter said.
“The break is nice, but it’s not going to last long enough,” Scotting said.
For more resources on federal student loans, click here.
Copyright 2022 KTTC. All rights reserved.