More than 22 million borrowers on direct federal student loans have frozen their payment plans since March amid the Covid-19 pandemic, according to data analyzed by Mark Kantrowitz, editor and vice president of research at Savingforcollege.com. If you are one of them, there are three things you should know before the discharge period ends on January 1, 2021 and before you want to start making payments again.
THE CENTRAL THESES
1. Prepare an emergency fund.
If you don’t already have one, now is the time to start. Those who have used the Cares Act allowance to pause payments and interest on student debt can potentially save some extra cash for an emergency fund. You may be able to avail yourself of this when student loan payments resume.
2. Evaluate your expenses.
It can be easy to use the extra money you saved from disrupting student loan payments on your regular expenses if you don’t budget carefully. Now is the time to get back on track. “Make the strictest, most accurate budget ever in your life,” said Lauryn Williams, financial planner and founder of Worth Winning. “You have to pay attention to every expense. Even if you go to the machine, keep track of it. ”This will help you get the most of what you saved on the loan payment.
3. Explore your options.
Williams suggests looking into options like income-based repayment plans if you run short. Schedule a call with your loan service provider to inquire about available paths for the future. Note that there will be trade-offs in options such as loan refinancing, consolidation, deferred payments and extended deferral. Be realistic too. Expecting a longer delay – or even complete forgiveness, depending on the outcome of the election – can only lead to disappointment and panic.
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8