How to Prepare for Student Loan Payments to Resume Soon

A young woman smiles as she writes on her notebook while her glasses are next to it.

Student loan payments on most federal student loans are scheduled to resume in 2023. The moratorium on payments has been in place since March 27, 2020, when the Coronavirus Assistance, Relief and Economic Security (CARES) Act was signed into law.

The law impacts the majority of student loan borrowers in the U.S., where former students and their parents owe nearly $1.6 trillion in student loan debt, according to Experian data. If the moratorium has helped you stabilize your budget, how can you start preparing now for payments, interest and collection efforts to resume? Here's what you should know.

Will Federal Student Loan Forbearance Be Extended?

The CARES Act not only paused payments on federal student loans but also dropped interest rates to zero and halted collection efforts by the Department of Education on loans that are in default.

The initial provision was slated to end September 30, 2020, but the Trump and Biden administrations both issued extensions. The moratorium's expiration has been extended several times, with the most recent one coming in November on the heels of court challenges to the forgiveness plan. Currently the Biden administration says payments will resume 60 days after the challenges are resolved, and if they are not resolved by June 30, 2023, then 60 days after that date.

How to Prepare for Student Loan Repayment

If you are fortunate enough to be one of the student loan borrowers eligible to have up to $20,000 of your student loans forgiven according to President Biden's loan forgiveness plan, your student loans may suddenly feel more manageable. That said, if you haven't been making your payments during the moratorium, resuming your remaining payments could still be a significant adjustment.

Depending on your situation and budget, there may be several ways you can approach paying down your student loans. Here are some ways you can start thinking about preparing for student loan payments to start up again.

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.

To make a budget, 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.

With that information in mind, you can start planning how you want to spend your money for the upcoming month, including your student loan payment. Check with your loan servicer to confirm your payment amount in advance, as it's possible it may have changed. Once student loan payments start up again, your budget will help you make sure you have enough cash flow for that expense, along with all of your other ones.

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.

If you've improved your financial footing, however, you could consider putting more toward your student loans than is required. Even a little extra every month can shave off months of repayment and hundreds or even thousands of dollars in interest.

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, Mechanical Turk or Thumbtack
  • Tutoring young students
  • Becoming a mystery shopper
  • Walking dogs

Take some time to consider several options, including the time requirement, flexibility and pay, to find the best one for you.

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

While many student loan borrowers have managed to get back on their feet financially since the economy was hit hard by the pandemic, others may still be experiencing financial hardship.

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.

Student loan refinancing can be another way to reduce your monthly payments, but private lenders typically don't offer income-driven repayment plans, and their forbearance options are often less generous than what the federal government provides.

Monitor Your Credit as You Pay Down Your Debt

Regardless of how you approach your student loan debt, it's important to keep track of your credit score and credit reports.

With Experian's free credit monitoring service, you'll be able to keep track of your FICO® Score and regularly review your Experian credit report to understand what impacts your score and to address issues as they come up.

You'll also get real-time alerts when changes are made to your credit report, such as a new account or inquiry. As you monitor your credit, you'll be better positioned to build a strong credit history and to prevent potential negative items from doing significant damage to your credit score.