How to Prepare yourself for Student Loan repayments May 1, 2022

It's been almost two years now that federal student loan borrowers haven't had to pay any interest or principal on their debt. Below are some ways to prepare yourself for federal student loan repayments.

Make a Budget

If you don't already have a budget in place, now may be a good time to start using one. A budget is a simple way to help you understand exactly where all of your money is going.

Start by writing down your income and expenses from the last few months to get an idea of where your money is coming from and where it's going. Depending on your comfort level, break out your expenses into different categories—the more categories you have, the easier it will be to make decisions about how to allocate your spending.

Cut Costs

It's been a long time since student loan payments were required, and your budget may have changed significantly by now. If you've started using the money that would have otherwise gone to student loan payments for other purposes, you may have to cut back in certain areas of your budget.

As you look for areas to cut back, be honest with yourself but also reasonable, so you can achieve your debt payoff goals while also being able to pay your other bills on time.

Earn More Income

If you have the time, you may also look into opportunities to earn more income. This may include working overtime at your current job, taking on a second, part-time job, or starting a side hustle.

If you're thinking about getting a side hustle, opportunities are plentiful, so do some research based on what you enjoy doing or what you're good at to find the right fit.

Some common side hustle options include:

• Driving for Uber or Lyft
• Delivering food or groceries for apps like DoorDash and Instacart
• Buying and selling used items online
• Renting a room on a short-term rental website
• Performing odd jobs on Craigslist
• Tutoring young students
• Becoming a mystery shopper
• Walking dogs

What to Do if You Can't Afford Your Student Loan Payments

If you believe you might still have trouble paying your student loans once the federal student loan payment pause ends, here are some potential solutions:

• Request forbearance or deferment. The federal government offers forbearance and deferment for people experiencing financial difficulties. Your options may depend on your situation, so contact your student loan servicer directly for more information.
• Get on an income-driven repayment plan. The Department of Education offers four different income-driven repayment plans, all of which can reduce your monthly payment to 10% to 20% of your discretionary income. That way, you don't have to worry about the end of a forbearance plan creeping up on you and being right back where you started. Income-driven repayment plans also extend your repayment plan up to 20 or 25 years, after which any remaining balance is forgiven.

These options can provide immediate relief and potentially help you get to where you need to be financially to continue paying down your student loan debt.