Student Loan Repayments Resumed in October

After a pause of more than three years, interest on federal student loans resumed on September 1, 2023. This meant that in October, more than 43 million Americans had to start repaying their loans.

“Successfully dealing with student loans begins with knowledge, budgeting, and a clear repayment plan,” says Scott Ente Senior Vice President of David Lerner Associates. “Understanding the terms of your loans, exploring available repayment options, and creating a budget that accommodates your monthly payments are essential steps. Remember, it’s not just about paying off the loans; it’s about building a stable and prosperous financial future.”

Challenges and Concerns

Recent data showed that most borrowers (85 percent) believed they would be under financial strain from having to repay their student loans. 46 percent said they were not financially prepared for their loan repayments to kick in.

How much did they have to pay? Alarmingly, the research found that many were not sufficiently informed on repayment details. Less than a third (30 percent) knew when they had to start paying back the loan. Close to half (48 percent) had no idea how much the loan repayment was going to be.

If you had a loan, it was important to start planning your finances and budgeting accordingly.

Resumed Federal Student Loan Payments: How to Prepare for October 2023

While the prospect of resuming loan payments could be daunting, proactive preparation could make the transition smoother and more manageable.

Here’s some advice on how to prepare for the impending restart of federal student loan payments:

1. Review Your Loan Portfolio: Start by taking a comprehensive look at your federal student loans. Understand the types of loans you have, their interest rates, and the total outstanding balances. This will give you a clear picture of your financial obligation.
2. Update Your Contact Information: Ensure that your loan servicer has your current contact information, including your email address and phone number. They may send important notifications about your loans, including repayment details and changes in your account status.
3. Know Your Repayment Options: Familiarize yourself with the various repayment plans available for federal student loans. Options include the standard 10-year plan, income-driven plans, and extended plans. Evaluate which one aligns best with your current financial situation and future goals.
4. Create a Budget: Budgeting is essential for managing your finances effectively. Create a detailed budget that accounts for all your income and expenses, including your student loan payments. This will help you allocate funds wisely and avoid overspending.
5. Determine Loan Forgiveness Eligibility: If you’re working in a public service job or pursuing certain careers, you may be eligible for loan forgiveness programs. Investigate these options to see if you qualify and understand the requirements for forgiveness.
6. Set Up Automatic Payments: Consider setting up automatic loan payments through your loan servicer. This ensures that you never miss a payment, and some services may offer interest rate discounts for enrolling in autopay.
7. Explore Refinancing and Consolidation: Depending on your financial situation and goals, you might want to explore loan refinancing or consolidation. Refinancing involves taking out a new loan with a private lender at potentially lower interest rates, while consolidation combines multiple federal loans into one, simplifying your repayment.
8. Seek Professional Advice: If you’re uncertain about the best repayment strategy or need guidance on managing your student loans, consider speaking with a financial advisor or a student loan counselor. They can provide personalized advice based on your unique financial situation.
9. Stay Informed: Keep yourself informed about any updates or changes in federal student loan policies and repayment options. The student loan landscape can evolve, and being aware of your rights and benefits is essential.

The resumption of federal student loan interest in September 2023 brings a new financial responsibility for millions of Americans. However, with careful preparation and a well-thought-out repayment strategy, you can successfully navigate this transition.

Remember that taking proactive steps today will lead to a more secure financial future tomorrow.

---

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.