How to Prepare for Student Loans to Resume in September

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Get ready to start paying off your student loans again.

That’s what financial experts are telling borrowers with federal student loans, who, since March 2020 have enjoyed a suspension of their payment obligations due to the pandemic. While lots of borrowers hope that the suspension will be extended beyond the current expected end date of Sept. 30, many experts don’t think that is likely.

Thus, it is important for these borrowers to get ready—by evaluating their budgets and payment options—before the scheduled repayments are due.

“It can add some peace of mind to the rest of your summer,” says

Ashley Norwood-Struppa,

who is regional director for the Northeast at AccessLex Center for Education and Financial Capability, a provider of on-campus and online resources. “I don’t want anyone to be surprised by that bill in the fall.”

Here’s what you might do now.

• Know what you’ve borrowed. Many borrowers might not know how much they owe if they haven’t been making these payments in over a year. Recent grads, too, need this information since after a six-month grace period they will be required to start making regular payments. That will be in November or December for many.

The Federal Student Aid website, at studentaid.gov, shows users how much they have borrowed and estimates what their payments will be. Using the same login credentials as for their Fafsa (Free Application for Federal Student Aid), borrowers can see all of their data and who their federal servicer is.

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Recent grads who have private loans as well should contact those lenders to determine what those payments will be and what repayment options exist. Some lenders will reduce the interest rate slightly for those who enroll in auto debit.

Strategize your repayment options. Federal-loan borrowers can use the Loan Simulator tool, available at studentaid.gov, to estimate what their payments will be under different repayment options. Even borrowers already enrolled in a repayment plan should use the tool to double-check whether the plan is still best for their circumstances.

Recent grads who are about to start making federal loan repayments should think about their budgets and their repayment goals. Would you like to lower your payments as much as possible, or do you want to pay as little as possible overall, even though this strategy will involve higher monthly payments?

If you plan to make payments under an income-driven repayment program, which is intended to make payments affordable based on your income and family size, Ms. Norwood-Struppa recommends applying the month before your first payment is due. You can apply online at studentaid.gov, and the process will take about 15 minutes.

Borrowers with private loans will need to strategize repayments based on the options offered by their individual lender or lenders.

Tuition at America’s public universities has nearly tripled since 1990. With President Biden looking to ease the burden for some students, experts explain how federal financial-aid programs can actually contribute to rising costs. Photo: Storyblocks

Consider refinancing with a private lender. Many people have federal loans with high interest rates from several years back. If they can afford it, and they have good credit, they might want to consider refinancing with a private lender for a lower rate so the loans can be repaid more quickly, says

Wilson Coffman,

president of Coffman Retirement Group in Huntsville, Ala.

Borrowers in this situation first should ask themselves some questions to help them gauge their ability to repay—and to determine whether they are likely to need federal loan protections that would likely be lost by refinancing with a private lender. These questions include: Is my job secure and is my salary likely to grow quickly so I will be able to pay off my loans easily? How many loans do I have? What are my interest rates on these loans, and could I get a meaningfully better rate with a private lender? And how much longer will it be until the loans are repaid in full? If there’s only a year or two left, it probably doesn’t make sense to refinance, Mr. Coffman says.

There can be disadvantages to refinancing a federal loan with a private lender. Most private lenders don’t offer income-driven repayment. You will also lose access to federal perks such as income-driven loan forgiveness, teacher forgiveness or public-service loan forgiveness, if you qualify. Switching to a private lender could also make you ineligible for possible broad-based government-sponsored loan forgiveness that has been widely talked about. “It’s got to make sense mathematically,” Mr. Coffman says.

You don’t have to refinance all of your federal loans. You might decide to refinance only one that has a much higher rate than you could get with a private lender. If you already have a private loan, you might also be able to refinance it with your current lender, or a different one, to take advantage of lower rates.

In general, though, borrowers shouldn’t count on broad-based loan forgiveness from the government. You need to plan as though forgiveness won’t be an option, experts say.

“If you have student loans, you still need to set up a repayment strategy,” Ms. Norwood-Struppa says. “In the event that forgiveness happens, you can restrategize at that point.”

Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at reports@wsj.com.

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