Federal Student loan payments due in October
PANAMA CITY, Fla. (WJHG/WECP) -October is here and student loan payments are back, for the first time in three years.
“This is really a big financial shock for a lot of people to suddenly have to restart making those loan payments,” NerdWallet’s Personal Finance Expert, Kimberly Palmer said.
Financial planners say the first step in student loan repayment is knowing how much you owe, and what your payment options are.
“A lot of people put the money they would have spent towards loan payments on other essential things like rent and food. Now is a really good time to step back and look at your budget and see where you can cut back so you can start making those payments,” Palmer said.
If you are worried about not being able to afford your payment, Palmer said there are options.
“There’s a 12-month on-ramp. If you are not able to restart these payments and you don’t make the payments, you’ll automatically go into this on-ramp. Where you will not face penalties for 12 months. The downside is that interest still accrues during that time. So it’s not like you’re getting out of paying it, but it does mean you won’t face other consequences, like impacts on your credit report,” Palmer said.
There are also different repayment plans to choose from
“if you qualify for an income-driven repayment plan like SAVE, which is one that was announced recently. You want to make sure that you opt into whatever you’re eligible for and really pick the best repayment plan that makes sense for you. They get quite complicated, so the best way to figure out what’s best for you is to go to studentaid.gov and play around with some of the options,” Palmer said.
But according to Palmer the worst thing you can do is not pay at all after that 12-month period.
“After those 12 months are up, you do face serious consequences for not paying. For example, it can hurt your credit score. Your credit score is a really important number in your life because it determines whether you can qualify for certain mortgage rates, auto rates, or anytime you want to take out a loan. It impacts that even if you’re applying for something like a credit card. So you do want to protect your credit score. So it is important if you’re in that position where you just feel like you can’t pay instead of ignoring it, figure out what you can do,” Palmer said.
If you need help you can call your loan provider and see if they have hardship options available for you.
“In some cases, your loan servicer can work with you as well and so you wanna make sure you’re exploring all of the options available to you,” Palmer said.
Palmer said right now the best thing you can do is make a spreadsheet for your budget and cut out any unnecessary payments.
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