The student loan payment pause is ending: Here are tips to ease financial burden
MINNEAPOLIS -- Millions of Americans will start paying their federal student loans this fall. The change up is set to happen regardless of the U.S. Supreme Court's ruling on President Biden's student loan forgiveness plan.
"I mean, I knew that it was inevitable," Kailyn Van Der Wal said.
Interest rates start again in September, meaning the first payments in nearly 3.5 years are due in October.
"Part of me is like man, I wish we had just been paying for the last 3 years to get it over with," Van Der Wal said. "But not having to was also really nice."
Van Der Wal has been chipping away at student loan debt since she graduated from Bethel University in 2015.
"Sixty percent are consolidated private loans and the other forty percent are federal," she said. "For me, I've been still paying $700 a month for the last few years. So $700 to $1000 [isn't that bad]."
Same goes for Steven and Britta Bruno. The couple added two new additions to their family during the pause. Steven said it was nice to invest in other things during that time.
"We paid off a car, a couple student loans and we did some stuff around the house that would have been harder to do if we've been paying," he said.
Steven Bruno adds that they're feeling good about making payments again.
"We've enjoyed the nice break to be completely honest," he said.
It's not the case for everyone thought. Repayments have been out of sight out of mind for millions of Americans for the last nearly 3.5 years.
"Definitely something that people haven't thought about in a long time," author of "Student Loans Solutions" and founder of Young Adult Money David Carlson said.
Carlson says borrowers should take time to re-evaluate what loans you have and your spending habits. A lot can happen after 3 years after all.
"People have gotten married, divorced, had kids, changed careers," Carlson said. "A lot of life changes and a lot of changes in spending patterns. It's definitely important to review your spending and income and see how you are going to fit that student loan payment into your budget."
One way he suggests doing that is starting from the beginning. Head to studentaid.gov and look at how many loans you have and total cost. Take that information and put it into a calculator. Get the big picture of how much you owe and determine what payment plan works for you.
"The standard 10-year pay isn't the only plan," he said. "There's also a handful of income drive repayment plans that would cap your payment at about 10 or 20% of your discretionary income. That can make a big difference for people. Especially those who didn't look into that previously."
The Student Loan Advisors Institute suggests getting into the habit of paying now by investing what you would pay this fall into your savings monthly. Another idea is to break up your payments in whatever way works best for you, like two installments instead of one lump sum a month. Lastly, if you sign up for an automatic payment, the servicer takes .25% off your interest rate, according to Student Loan Advisors Institute.
