Get prepared to pay student loans
ROCHESTER, Minn. (KTTC) – In a little more than two months, federal student loan payments will start up after being paused for nearly two years.
The federal government has extended the moratorium four times since March 2020. It says the extensions are now over.
The Federal Reserve estimated that Americans owed more than $1.7 trillion in student loans in the third quarter of 2021. That’s on average of $37,172 loan debt amount per student.
“I think the biggest indicator, if you are going to be successful with budgeting and therefore getting prepared for the student loan payments repayments, is just gonna be the amount of time that you spend on it,” Financial planner and founder of Pulse Financial Planning Matt Elliott said.
There are three options to repay your federal loans. The first is to keep existing payments as they are as long as it fits in your budget. The second is to enroll in an income driven repayment plan.
“What that will do is potentially reduce your monthly payment based on what your income is, so if you’re on a standard payment plan right now and that really is going to impact your budget,” Elliott said.
The third is to refinance your federal loan into a private loan which could potentially reduce your interest rate, but you wouldn’t be able to benefit from federal pauses like the recent moratorium.
“You’re not going to be able to receive those benefits, because your loan won’t be owned by the Education Department anymore,” Elliott said.
Some college students will be making student loan payments for the first time.
“Definitely not paying the entire amount right away even if I do have that amount of money, I plan on saying as much as I can,” recent graduate Reed Carpenter said.
“I had drained a good portion of my savings paying for college, so I wouldn’t have to take out as many loans, but now that I have to start paying loans off again, my savings are gonna get drained,” recent graduate Kat Scotting said.
With the moratorium coming to an end, are students ready to start making payments?
“I understand for a lot of other people that aren’t in this situation that I am finding a job right out of college that this is very beneficial. For me, it’s a nice treat, but for other people it’s really life saving,” Carpenter said.
“The pause is nice, but it’s not gonna last long enough,” Scotting said.
For more federal student loan resources, click here.
Copyright 2022 KTTC. All rights reserved.