Student Loan Payments Have Been Extended. What Now?

One of the only (okay, the only) benefits of the pandemic for me has been the student loan payment deferment. This benefit comes with a price tag of almost 500k lives at the time of writing (and by the time this is all said and done, I imagine it will exceed 1 million lives). Our government shouldn’t have needed a pandemic to issue aid to those struggling with crushing student loan burdens. But that is the price we paid for our government to capitulate and give help to those crying in anguish. It makes me angry, but here we are.

What makes me angrier, though, is that this is not a sustained solution to the student loan crisis, but a bandaid that will be ripped off in October, unless President Biden extends the order further. At this point, only time will tell.

This means those of use with student loans need to start preparing to pay back our loans.

Here are three different strategies I’m using to prepare to start repaying mine back.

Reach out to your loan provider about Income-Driven Repayment (IDR) Plans.

If your current student loan payments are too high, you can change your payment plan. Some loan providers are not allowing you to change your plan until closer to September.

For instance, my student loans are serviced through Great Lakes. Their policy is that you can’t make any changes to your minimum payment unless you’re at least 90 days away from repayment.

I have a reminder set on my phone to call my provider then. And you can do this too. Figure out when you can change them, and then set an alarm to remind yourself. (I have one set for the first of July, August, and September in case I forget one of them).

Regardless, you should still be able to use a calculator on your provider’s site to estimate what the IDR payments will be. Collecting this information helps you create a budget including student loan repayment.

Continue paying your minimum student loan payments, if you can.

Keeping the habit of paying your student loans will set you up for financial success, since interest-free payments work in your favor. Plus, it’s way easier to keep paying your loans if you never stopped. If you can’t afford the minimums, check and see what your IDR plan minimums would be and pay those instead.

The more you pay in principal balance at once, the less you pay in interest. You no longer collect interest on the paid off principal amount. This strategy allows you to become debt free faster. Plus, having an interest rate of zero percent puts you in an exceptional position. Your entire payment is being applied to principal, taking years off the life of the loan.

I’m currently paying $50 a month towards my loans, which is less than my $269 minimum, but will be more than my income driven payments (a laughable $0, since I make so little). Once interest starts accruing though, $50 won’t cover my monthly interest. I’ll need to up my payments to $75 in order to cover that and still chip away at the loans.

Just realized that the $50/mo I've been contributing to my loans won't even cover interest when that's reinstated. Hello money anxiety, my old friend. pic.twitter.com/MGosdb6Vot
— Moriah Chace | Queer Journalist 🌈 (@MoriahChace) February 11, 2021

I’m so adamant on taking advantage of the interest free repayment because I need the extra time to bring down my principal balance and reduce the interest I owe in the long run.

Start saving for your payments.

If continuing to pay your balance down while living through a pandemic is stressful, then saving your money might be the right strategy. Open a high yield savings account and deposit the money there. This prepares you in two ways.

First, it gives you a buffer for first couple payments. This is especially true if you cannot afford your entire minimums every month and haven’t looked into IDR plans yet. Say your minimum payment is $200 and you save $50 a month. In a couple months, you will have saved that first repayment.

Second, saving your student loan payments instead of paying down your loan gives you a makeshift emergency fund. Instead of having used the money for student loans, it’s sitting in a fairly easy to access bank account. So, if you are laid off or have to self quarantine without pay, you have money to fall back on.

I’ve decided not to utilize this strategy, since having loans stress me out more than not having money. But this is definitely because I already have an emergency fund.

If I didn’t, this would be my preferred strategy, and there’s no shame in using the government provided assistance given to us to help during a time of international crisis.

Just having a plan can save you a lot of worrying about your student loan payments.

Most importantly though, you need to have a plan. Whether you continue to save your money, pay your loans, or request an IDR plan, being prepared will alleviate some of the stress. A plan is your roadmap to financial success, so you can tackle your student loans confidently when October comes around.

I know it can be a daunting task, but it’s so beneficial to your financial health and well being. And honestly, your mental wellbeing as well. I know for me personally, knowing that I can contact my loan provider and having a budget in place for when my loans are reinstated means I won’t be caught off guard. I can sleep slightly more peacefully.

I’d love to sit down and chat with you. Feel free to schedule a free 30 minute consulting call with me.

Posted in Debt Repayment

Moriah Joy

Moriah Chace founded this site in 2018 to narrate the money journey she and her husband were on. After their divorce, she pivoted and is now tackling living well on a low income budget. She is currently the editor at Poorer than You. And she has words in Live Better, Deal Taker, and EcoFrugals. As part time barista and a full time coffee addict, she currently attends UTA for a master's in Civil Engineering and wants to change the world one high speed train at a time.

Student Loan Payments Have Been Extended. What Now?

Reach out to your loan provider about Income-Driven Repayment (IDR) Plans.

Continue paying your minimum student loan payments, if you can.

Start saving for your payments.

Just having a plan can save you a lot of worrying about your student loan payments.

Moriah Joy

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