On March 13, 2020, most federal student loans went into “administrative forbearance” due to uncertainty surrounding the COVID-19 pandemic. During this time, your student loan had its interest rate set to 0% APR and loan payments were paused.1

Well, student loan payments are back. Starting September 1, 2023, interest will kick back in for the first time since 2020 if you still have a federal student loan. Your first payment since the pandemic will be due October 1, 2023. For many borrowers, this is causing panic and stress. While the initial effects of the pandemic have largely passed, rising prices and record inflation is still a problem. If that has you stressed, review the following tips to ensure you’re financially ready.

Check for Forgiveness

The first thing you should do is check if you qualify for any debt forgiveness programs. There are a few options, including:

Teacher Forgiveness. Full-time teachers who work for five years at a low-income school. https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher

Disability Forgiveness. People who have been permanently disabled. https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge

Closed School Forgiveness. If you attended a school that has since closed you might qualify. https://studentaid.gov/manage-loans/forgiveness-cancellation/closed-school

Public Service Forgiveness. People who work in non-profit sectors. https://studentaid.gov/pslf/

Review Your Loan Details

Log into your student loan servicer’s website and your StudentAid.gov profile. You’ll first want to make sure your contact information is accurate and up to date. Then, make note of the details of your student loan, such as:

  • When your payments are due
  • The monthly minimum payment
  • Current interest rates
  • Number of payments remaining
  • Projected payoff dates

This information will help with budgeting and possible loan consolidation options.

Pick a Good Payment Plan

One thing that can help with your student loan debt is to enroll in an income-driven repayment plan. Just as the name suggests, this plan is tied to how much you earn. Though this strategy does extend the payments out, if you’re still paying after 20 to 25 years, your remaining debt will be dismissed.

Review the different option for income-driven repayment plans on the government’s student aid website.

In addition, to protect the most vulnerable borrowers from the worst consequences of missed payments when they restart, there is a 12-month “on-ramp”. This runs from October 1, 2023 to September 30, 2024.

So, what does it mean? If you miss a monthly payment during that time frame:

  • It’s not considered delinquent
  • The missed payments aren’t reported to credit bureaus
  • The loan isn’t placed in default
  • You’re not referred to debt collection agencies

Borrowers don’t need to take any action to qualify for this on-ramp. It’s an automatic benefit to ease you back into paying your student loan.

Pay Extra

If you have any extra money, it’s always a good idea to pay more than your monthly payment. That’s because your monthly payment is the lowest amount you can pay without incurring penalties. Any extra money will go directly toward lowering your principal balance. That’s huge, because you’ll pay off the loan faster and pay less interest.

Revisit Your Budget

Between the pandemic and record inflation, your budget has likely been all over the place during the last few years. Perhaps you took on other debt since you didn’t have your student loan payment to account for. It’s smart to sit down and create an entirely new budget that incorporates your returning student loan payments.

  1. Identify all your fixed expenses, such as housing, transportation, food, utilities, etc. Fixed expenses are things you cannot live without and have to pay for.
  2. Look at your other expenses and find areas to cut back. You’re not trying to punish yourself by any means, so there is room for fun. However, you may need to scale back on going out to eat, buying coffee, attending concerts, buying new clothes, streaming services, etc.

Your goal is to create a budget that allows you to meet your primary financial obligations, resume your student loan payments, and live comfortably. That may require some sacrifices.

Explore Student Loan Consolidation Options

If you have multiple federal student loans, you might be able to consolidate them into another federal loan called a Direct Consolidation Loan. By consolidating, you could potentially reduce the amount of your monthly payments. Plus, managing a single payment versus multiple monthly payments is easier.

If your student loans are private, loan consolidation is still an option. You might also want to look into refinancing your private student loans with another private lender. By refinancing, you could potentially qualify for lower interest rates and more favorable terms, further lowering your monthly payment amount.

Use Financial Windfalls to Get Ahead

Financial windfalls are larger sums of money that come your way. They can be expected or a complete surprise. For example, expected windfalls might include your tax refund or an annual work bonus. Unexpected windfalls could be receiving an inheritance or a work promotion with a significant pay raise.

Whether the money is expected or not, it’s wise to include a portion of this money in your budget for paying down outstanding loans. Anytime you can pay a little extra toward a loan’s principal balance, you’ll reduce the amount of interest you owe and pay off the loan quicker.

Look for Other Income Streams

If your new budget isn’t where you’d like it to be, you might consider looking for additional income streams. Examples include:

  • Pick up extra hours or shifts at your current job
  • Use your skills for freelance projects – if you’re creative, Fiverr is a great place to start
  • Begin a side hustle, such as driving for a ride-sharing company or selling on sites like Poshmark
  • Work part-time on the weekends – a lot of local businesses are desperate for help
  • Find cash gigs – babysit, mow lawns, walk dogs, shovel driveways, etc.

Additional income is a boost to your budget. It might be just what you need to help cover your student loan payments.

We’re Here to Help!

With federal student loan payments set to resume in a few short weeks, it’s wise to start preparing for these payments now. Refinancing or consolidating non-student loans (e.g., car loans, home loans, credit cards) could free up a significant amount of money to help cover these future payments.

If you’re interested in reviewing your existing loans, making a budget, or would like to learn more about loan refinancing, we’re ready to help. Call, chat, text, or stop in! Our lending specialists are available 9am-4pm ET. (315) 671-4000.


1 https://studentaid.gov/announcements-events/covid-19/payment-pause-zero-interest

2 https://studentaid.gov/announcements-events/covid-19

Parts of this article adapted from Chris O’Shea with SavvyMoney

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.