3 things to do about your student loan right now
New federal programs, paired with strategic budgeting, can give borrowers a fresh start at loan repayment.
With federal student loan interest accruing again and payments resuming in October, now is the time to be proactive and educate yourself on the options available that could make repayment easier.
As you restart your student loan payments, remember that “you invested in yourself,” said Michael Liersch, head of Wells Fargo’s Advice and Planning. “This education has brought you abilities and the capability to earn money. Use that as motivation to budget and allocate money to your student loan repayments in a way that’s empowering and sustainable.” Watch more on YouTube.
Liersch has these suggestions to help borrowers prepare.
1. Contact your student loan servicer now.
Confirm that your contact information is up to date. Be sure you know the minimum amount and due date of the first payment. Setting up automatic payments may also save you interest (.25%!).
Ask for the details of your repayment plan, and make sure you know what happens if you can’t make a payment.
2. Explore your options.
This summer, the government introduced updated income-driven repayment options, noting that many federal student loans are eligible for at least one of them. In some cases, you may be able to move to a repayment plan — based on your income or your type of work — which can lower your monthly payment.
Be proactive in seeking ways to manage your student loan payments. These new programs present opportunities to make repayment more manageable and can represent a fresh start for many borrowers.
3. Be intentional about your spending.
Outline and understand where your money is going and what its going toward. Determine things that are truly essential — like housing, groceries, utilities, and insurance — versus discretionary items that you can survive without. Streaming services, entertainment, vacations, and other nonessential items may represent areas for you to focus more deliberately on your spending and allocate money to your student loan repayment. It’s not about stopping your spending; it’s about making more of your money where you’re spending it.
As an example, you can optimize rewards programs, use coupons, and shop for discounted items. If you have the opportunity, consider adding hours as part of your job or a side hustle. Remember, you’re not alone. Over 40 million borrowers in the United States are paying back these loans. So, while you may opt for a picnic instead of a night on the town, know that many others are making similar choices — and taking advantage of available options and programs — to help themselves stay on track. In other words, be open with roommates or loved ones about the need to collaborate on the trade-offs you may need to make.