It looks like federal student loan forbearance is actually coming to an end;which means it’s time to start up the payments again after almost two years of reprieve. There has been rumblings of loan forgiveness, and even an elusive memo within the Biden administration, but at this point it’s time to get realistic.
There were three main routes to taken when Loan forbearance started in March 2020:
- Keep paying the balance while the interest is at zero
- Save up payments for a large lump sum right before forbearance ends
- Stop paying completely and save the money, or pay other debts instead
Establish an IBR loan plan with your lender
This is the first thing on everyone’s radar as that fateful day approaches. And why wouldn’t it be? Because it will be a mad dash to obtain the coveted IBR plan in time for February 1st, it’s important to jump on it sooner than later. I would definitely expect longer wait times on the phones than usual, as establishing a repayment plan, while not ideal if you want to pay-off the loan early, can benefit the borrower in the following ways:
- Allows leeway in payment amount, even if you decide to pay more than the minimum.
- Gives access to a more realistic monthly. number, especially if you are in a job transition.
- Doesn’t entirely take away the extra money you’ve been using since loan forbearance started.
These are just a few ways that the IBR plan can help you make a smooth transition back into paying. There are a plethora of other benefits to going this route that I’m sure you will run into as you get your ducks in a row. But these are the three benefits that I personally found when using this method of payment right out of college.
Lock your budget tight for the coming year
Let’s be clear about one thing: if you haven’t been saving your loan payments for a large lump sum, or paying them during the pandemic, it won’t be the easiest transition. There is a certain level of discipline that it takes to voluntarily pay thousands in student loans. Where’s the fun in that?
Though it may not be the most enjoyable, preparing an airtight budget is the best way to smoothly transition into paying back what we owe. If this is paired with enrolling in the IBR plan, you will be a hundred steps ahead of thousands of americans who might not know where to start. Creating a budget doesn’t always mean that you have to deprive yourself, or go without. It can actually provide peace of mind, as your money will be put to work how YOU see fit, and you will know what to expect regarding bills each month. While it may not be sexy, there’s nothing wrong with routine for your finances.
Be realistic about your loan payment plan
This situation, while not ideal, doesn’t have to be the end of the world. A large part of getting back into loan repayment is being realistic about your abilities. There will be a lot of examples of people killing it with their loans, and paying thousands of dollars per month. When you encounter this, please remember that everyone has a different pace, and what others are accomplishing doesn’t diminish your progress.
Comparison while on your loan repayment journey can really sabotage your self esteem, and even reverse your trajectory. And we definitely want to avoid that. The way that I block out the noise while working towards any goal is by seeking people who are at the same stage as me. Some of these people will have more money to fuel their progress, and some will have less. The important thing to do is to keep positive, and enjoy seeing similar progress from others.
I also like to seek out community where I can gain mentorship, or inspiration within reason. I say within reason because eventually the people within your community will outgrow your current progress, and vice versa. Part of being realistic is keeping this in mind, and being alright with things not being static.
Student loan forbearance was a great time to save up extra cash and have relief from the school debt looming over all of our heads. But now that its ending, I hope the tips above are helpful to those who have anxiety about paying again. While loan forgiveness is uncertain, it’s easy to dwell on actions you should have taken during the forbearance, but the most important thing to do is be kind to yourselves. There are many in this country in the same exact position, and beating ourselves up won’t change anything.
What are your thought on loan forbearance ending late January? and what did you do with the two year period of reprieve? I would love to hear different strategies that you’ve made to tackle these loans, so please comment below!
Thanks as always!