How to prepare for the resumption of student loan repayments

Having a plan to resume student loan payments can help you avoid financial headaches. (iStock)

The federal CARES law offered financial protections to people struggling with the COVID-19 pandemic. A key benefit included in the law and recently extended was a temporary forbearance for federal student loans until January 31, 2020.

If you’re one of the millions of borrowers who owe federal student loans, it’s important to prepare for the resumption of student loan repayments in February.

How to Prepare for Student Loan Repayments in February 2021

Here’s what you can do until then to prepare.

  1. Keep paying off your student loans
  2. Find a student loan refinance
  3. Talk to your student loan lenders or loan managers
  4. Explore other options

1. Keep paying off your student loans

The CARES Act reduced interest rates on eligible federal loans to 0%. Since interest doesn’t accrue, you don’t have to worry about having a higher balance to pay in February. You can now take advantage of the 0% interest window by continuing to make payments on your loans. Every dollar you pay can eat into your balance.

If you can’t afford anything, dig into your budget to see how affordable the payments will be once February rolls around.

“Students should take an honest look at their finances,” said Josh Simpson, financial advisor at Lake Advisory Group in Lady Lake, Florida. It means knowing how much you are spending and what you can actually afford to pay on your loans. .

If you have private student loans and are looking for student loan payment relief, visit Credible. You can get prequalified student loan refinance rates from up to 10 lenders to see if this approach could save you money. (If you have federal student loans, you could lose federal benefits, so think carefully about this option).


2. Look for a student loan refinance

Refinancing a student loan is something to consider if you are interested in:

  • Lower interest rates on student loans
  • Switching from fixed interest rates to variable interest rates or vice versa
  • Lower student loan repayments

Thanks to the Federal Reserve, interest rates are close to their historic lows.

If you already have private student loans, it might be a good idea to refinance them if you could save money on interest or make your monthly payments more affordable. When considering refinancing student loans, research your options carefully. Use an online tool like Credible to compare fixed interest rates and variable interest rates for private student loans.


But if you have federal student loans, think about the refinancing tradeoffs first. Since refinancing means replacing your existing loans with private student loans, you would lose some protections afforded to federal loan borrowers. This includes the benefits of the CARES Act such as student loan forbearance and the ability to enroll in an income-based repayment plan.

Simpson said if you’re on the fence about refinancing or which lender to choose, you should ask a lot of questions.

“You want to get as much detail as you can about the terms of the new loan,” Simpson explained.

Since interest rates are very low right now, you have a good chance of refinancing your private student loan at a lower rate than what you are currently paying. See how much you could save today by refinancing. You can also use an online student loan refinance calculator to estimate your monthly payment amount.

3. Talk to your student lenders or loan managers

If you’re worried that you might be able to pay off your student loans once they start again in February, it’s important to stay in touch with your lenders.

“The best thing you can do is start talking with your loan officer now,” Simpson said. “The earlier you start the process, the more likely the lender is to work with you, because they will appreciate that you didn’t wait until the last minute.”

Private student loans are not covered by the CARES Act, but your lender can still help if you are having financial difficulties. For example, they may offer temporary forbearance or allow you to make interest payments only on your loans for a set period.

Refinancing is also an option. Private student loan lenders will take your credit history and credit score into account. Therefore, if you are new to using credit, you may need a co-signer to get approved at the best rates. Consider visiting Credible to compare student loan refinance rates from several lenders without affecting your credit score.

4. Explore other options

If you have federal loans, the end of the CARES Act relief means you will no longer be eligible for his student loan forbearance allowance. The interest rates on your loans will also return to what they were before the deed.

But that doesn’t mean that you no longer have any options to make your loans more manageable. While refinancing is an option, you may also want to consider taking advantage of the benefits of federal loans, such as:

  • Adhere to an income-based repayment plan: The less you earn, the less you are asked to pay, Simpson pointed out. An income-based repayment is required if you are interested in a student loan forgiveness.
  • Withholding or deferral of a student loan: You may be eligible for student loan forbearance or deferral outside of the period permitted by the CARES Act. The Department of Education allows general and mandatory forbearance periods, as well as deferrals of eligible student loans.

Either could allow you to temporarily suspend payments. Keep in mind that interest can continue to accrue on your loans.

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