Federal student loan repayment begins soon. Here’s how to get ready
We’re two weeks away from interest on federal student loans starting to add up again and a new survey found 46% of student loan borrowers don’t know how much they owe.
Here’s why that matters and what you can do about it.
“The biggest takeaway is how incredibly stressful the resumption of these student loan payments are for people,” NerdWallet personal finance expert Kimberly Palmer told The Sum.
“If you’re experiencing this yourself, just know that you’re not alone. … And then if you’re not going through it, but you know people who are, just to be, you know, a little empathetic to how challenging it is.”
Nearly 44 million people owe more than $1.6 trillion in federal student loans, according to the most recent data from the Office of Federal Student Aid.
What did the survey find?
A NerdWallet survey of 2,000 adults — 316 with federal student loan debt — found that in addition to borrowers not knowing how much they owe, 57% don’t know who their loan servicer is, one-third aren’t sure what interest rate they have and more than one-quarter don’t know how to make payments.
Most borrowers weren’t making payments over the last three and a half years and instead used that money to pay for needs. More than one-third don’t think they’ll be able to make payments when the federal student loan payment pause ends in October.
Nearly two-thirds of borrowers said the payment pause improved their finances.
“Now people have to figure out where they’re going to find that money from to make their loan payments,” Palmer said.
Two in five people say they’ll have to change their budget significantly and nearly three in five borrowers say they need to up their income to afford payments.
What can you do?
▪ Your first step is to inform yourself, Palmer said. You have to know how much you owe and who your loan servicer is. You can do that by logging into the Federal Student Aid website.
▪ Then, figure out your repayment options, such as changing to the revamped SAVE Plan. The new plan, which was introduced after the Supreme Court shot down President Joe Biden’s student debt forgiveness plan, cuts how much of their discretionary income borrowers have to pay and means your loan balance won’t grow as long as you keep up with payments.
▪ You need to go over your budget. If you can’t afford payments without sacrificing essentials, such as food, utilities and housing, you can explore other options such as hardship programs that your loan provider or utility company may offer. One resource Palmer recommended: 211.org.
She said food spending varies the most and adjusting spending there is a good starting point. If you spend a lot going out to eat, she suggested cutting back. At the grocery store, Palmer suggested incorporating more leftovers, buying lower-priced products and just being “thoughtful about how you’re planning your budget.”
Another budget category to look at: subscriptions. Have a streaming service you keep getting charged for but don’t actually use? Cut it.
What is The Sum?
The Sum is your friendly guide to personal finance and economic news.
We’re a team of McClatchy journalists cutting through the financial jargon so you know how these issues impact your life. We verify information from diverse sources and keep the facts front-and-center, making finance and economic news add up for you.
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This story was originally published August 16, 2023 at 12:58 PM with the headline "Federal student loan repayment begins soon. Here’s how to get ready."
