Student loan forbearance began in March 2020 and, for over two years, borrowers didn’t have to pay anything towards their student loans, with no consequence. As Americans everywhere were met with new financial hardships, student loan debt relief was put in place, pausing all payments and keeping the interest rates at 0%. 

Not only did this effort help individuals deal with pandemic-related finances, but it also provided breathing room for the individual to focus on the essentials during these unprecedented times. However, student loan repayments set to resume on January 1, 2023, Americans everywhere are going to need to keep their student loans top of mind again. For borrowers who haven’t been making an active effort to pay off their student loans during the forbearance, it’s time to start preparing and revising those budgets. 

Student loan debt has hit a record high this year at 1.75 trillion and is said to grow six times faster than the U.S. economy. With the average borrower carrying roughly $37,787 in student loan debt, student loan repayment after covid relief isn't going to be easy to adjust to, especially with one-time student loan relief in limbo.

It can be overwhelming to think about how to tackle student loan repayments. Luckily, we’re here to help you know how to prepare for student loan payments, restructure your budget, and provide you with a few options you may have for tackling student loan debt head-on. 

Understand your payment and your loans

Before these payments come as a surprise, you’ll want to log back in, check your balance, and know your minimum payments. You’ll also want to check to make sure your loan is with the same service provider. Many federal student loan providers didn’t renew their contracts with the U.S. Department of Education, so don’t panic if your loan information is with a new provider. 

Take this time as an opportunity to create a new goal for yourself! Consider what you need to do to pay your loans off quicker and on time. You can use a tool like a loan simulator. This federal student loan tool is used to create a budgeting plan that can help you get ahead of your payments and make you feel in control of your finances. There are other debt repayment tools available that can help you map out all of your debts in one place. One of our favorite tools is Unbury.me.

Restructure your budget

New year, new budgets. Before those student loans kick in at the end of January, you should take a look at your budget/spending plan and see where you can make any adjustments and allocate more money towards the repayment. You can use your year-end personal money review to evaluate your spending habits and see where you can find extra money to put toward your debt. 

Don’t forget: Budgets and spending plans are meant to be adjusted and revised every year as you take on new responsibilities and create new goals for yourself. This can help you break bad spending habits and give you a fresh start for better financial stability. As you restructure your budget, it’s important to look at the bigger picture, create obtainable goals for your finances and prepare yourself for student loan repayment after covid relief.

Revise your repayment plan

There are several unique repayment plan options that studentaid.gov provides borrowers. Before getting back in the swing of making payments, we encourage you to research the different plans, know the one you currently have and make sure it fits your current needs as an individual. You can take a closer look at the full list of repayment plans on the federal student aid website. 

Enroll in autopay

Autopay is a great solution for anyone looking to stick to a budget and not worry about having to remember to make your monthly payments. If you have a regular and consistent paycheck that comes in monthly or bimonthly, we encourage you to set up autopay so that your payment is pulled when you receive your check. 

Bonus if you can afford it, pay off your loans twice as quickly by making payments from each of your twice-a-month paychecks.

If you can afford to, pay more than the minimum and pay often

If you can afford to and you want to get ahead of the interest, you’ll need to consider paying more than the minimum payment. Student loans can be stressful, and when the interest starts to pile on, you may feel like it’s hard to get a good grip on your student loans. Don’t panic. 

Try not to let the payments overwhelm you if you can only pay the minimum right now as you acclimate to this change, that’s more than okay! Don’t drive yourself broke trying to pay off your student loans quicker. Sometimes, you need to put yourself first, take a step back, and do what you can. 

Consider consolidation

If you have more than one student loan you need to take care of, you may choose to consolidate your loans into one payment. Consolidating can help you get a lower interest rate and ensure you only have to worry about one payment every month, not multiple. Before you pull the trigger and go with this option, we recommend looking into the pros and cons to ensure this is the right choice for you. 

Understand the consequences of refinancing

If you have a high-interest rate, it can be challenging to feel in control of your payments. To get a lower interest rate, you may consider refinancing your student loans with a private loan provider (assuming you can obtain a lower rate). There are some benefits to doing this. For starters, a lower monthly payment and a lower interest rate. 

However, If you plan on making the switch from a federal to a private loan, you’ll lose federal loan benefits, such as the government-mandated payment pauses we just experienced, one-time debt relief, and income-based-repayment plans. For most folks, losing those benefits isn’t worth the lower interest rate and lower payment. But make sure you know your options and know what’s right for you. 

Short-term relief 

If you don’t feel like you’re in a good place to start paying back your student loans, you can always reach out to your loan provider and ask for short-term relief. However, it’s important to understand how deferment or forbearance impacts your loan. While interest accrues, this could increase your loan balance. We recommend doing your research, weighing out the pros and cons, and using short-term relief as a last resort. 

What happens if you don’t pay your loans back?

You must pay your student loans back to avoid any negative consequences that can affect your financial future and well-being. 

If you choose not to repay your loans for over 90 days, your loan provider will have the authority to report this to the three credit bureaus, which can put a dent in your credit report. 

After 120 days, your loan will go into default. This means you’ll need to face harsher consequences that affect more than just your credit score. 

For starters, if you think you might want to return to school again in the future, the federal government can choose not to allow you to receive any student loans to fund your education. 

They can also choose not to give you a tax return or take a portion of your social security benefits in the future. 

We get it, no one wants to pay their student loans. However, you must try to make the minimum payment or reach out for help or assistance.

Never forget: you’re not alone. There are a lot of Americans who need to pick up student loan repayment after covid relief. In fact, 43.2 million student borrowers need to relearn or remember how to prepare for student loan payments. 

As you gear up to pay down your debt, restructure your budget, and get your finances under control, it’s important to keep resources in mind and ask for help if you need it. Studentaid.gov provides several resources that can make you feel prepared and ready to make monthly payments that you can afford.