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Navigating Student Loan Payments (How to Prepare Now)

How to Plan Ahead and Stay Ahead

Some 43.5 million Americans have borrowed a total of $1.78 trillion in student loan debt as of March 2023, according to the Federal Reserve. That’s an average of $37,787 per borrower. If you’re among those with student loans, or a recent college graduate, the payment grace period that came with the pandemic is about to end in October. Here’s how to navigate your student loan payments in the coming months and years. 

There is some good news. The U.S. Department of Education says borrowers in default on their loans will get a fresh start. That means even if you had missed nine months of payments prior to the pandemic, that default will be eliminated allowing you to apply for payment discounts and other money-saving advantages. 

Know Who You are Paying

Start by logging into the Federal Student Aid (FSA) website with your FSA ID. This will quickly tell you where to send your payments when they become due again. This is also where you’ll find information about your possible debt forgiveness, interest rates, and your current payment plan. If the name of your college loan agency sounds unfamiliar, you’re not alone. It’s estimated that nearly a third of all borrowers will be paying a new company. 

Central Willamette CU Quick Tip: While you are reviewing who to pay, double-check that your personal and loan information is correct.

Choose Your Payment Plan

Depending on your income and whether or not you’re in school, you can choose a repayment plan that works with your monthly budget or overall financial picture. 

The standard repayment plan simply calculates what you owe, including interest, and divides it up into monthly payments over 10, 12, 15, 20, 25, or 30 years (based on your total loan debt). If you owe $60,000 or more, they’ll give you 30 years to pay it back. With this plan, your monthly payments could seem steep when compared to the 0%, $0 payments of the last three years. 

Income-driven payment plans are calculated as a percentage of your discretionary income. That can be as little as $0 per month. But don’t forget about the interest, which continues to accrue whether you make a full payment or an income-based payment. That means the balance of your loans could grow, even though you aren’t borrowing any more money. 

Central Willamette CU Quick Tip: Choose automatic payments to reduce your interest rate by a quarter of a percent. This could add up to thousands in savings.

Income-based options include: 

  • Revised Pay As You Earn Repayment Plan (REPAYE): Generally, 10% of your discretionary income. 
  • Pay As You Earn Repayment Plan (PAYE): Never more than 10% of your discretionary income.  
  • Income-Based Repayment Plan (IBR Plan): 10-15% of your discretionary income, depending on when you first started making payments.  
  • Income-Contingent Repayment Plan (ICR Plan): 20% of your discretionary income with annual adjustments. 

There is also help when you need it. In some cases, borrowers may have the option to apply for a 12-month grace period. But so far, details about this option are sparse. Additionally, debt forgiveness plans can also be an option. 

Look into Loan Forgiveness

Have you worked, or are you currently working for a government agency (military, public education, state government) or a nonprofit? There’s a chance you could qualify for the Public Service Loan Forgiveness (PSLF) program. There is some red tape to navigate and qualifications to meet, but overall it eliminates all of your debt after 10 years of regular payments. 

The Department of Education says that several million student loan borrowers could automatically see a forgiveness credit of up to three years of payments based on a one-time payment adjustment. If you have a William D. Ford Federal Direct Loan, look closely at your account to see if you qualify. 

Pay Some Interest to the Interest

Starting September 1, 2023, student loans will begin to accrue interest. The first payments will then be due in October. If you have a student loan, making an interest-only payment will keep your balance from increasing over that month-long period. 

Get Some Help

Both the Office of the U.S. Department of Education’s Federal Student Aid program, as well as The Institute of Student Loan Advisors Corporation (TISLA) have resources and advice for student loan borrowers. Utilize their online payment and plan calculators to estimate your monthly payments and the overall cost of that debt, send questions to advisors, and more. 

Central Willamette CU is Here for You

Whether you’re in college now or looking to refinance your college expenses into a single, easy-to-manage loan, Central Willamette can help. That includes personal loans for smaller balances as well as a home equity loan to bring all of your college expenses into focus. Have questions? Need some help? Stop by any branch or call (541) 928-4536.