Morgan Stanley
  • Wealth Management
  • Apr 14, 2022

What to Know Before Federal Student Loan Payments Resume

The temporary pause on federal student loan payments under the CARES Act ends August 31, 2022. Here are six strategies to help you prepare.

For many, payments on federal student loans have been paused since the passage of the CARES Act in March 2020. But this temporary relief is coming to a close, and those borrowers must gear up to pay down their student debt once again.

If you’re among them, here are six tips to help you recalibrate as payments resume. 

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1. Confirm Your Contact Details

The first step is to make sure you have the basics covered. If you’re one of the many people who moved states during the pandemic—or even if you just switched apartments—you’ll want to ensure that your contact information is up to date so that you don’t miss any important communications from your loan servicer.

2. Check Your Auto-Debit Status

If you had previously been relying on auto-debit to make your loan payments, don’t count on that to kick in automatically once the pause comes to an end. Check your status, as you may need to opt in again.

Or, if you weren’t enrolled in auto-debit before the pause, this might be a good time to consider doing so. This can help you avoid missing or making late payments, and there can even occasionally be interest rate incentives for taking advantage of this feature. 

3. Evaluate Your Options

Another way to streamline the bill-paying process is through loan consolidation or refinancing. If you go this route, be mindful of any impacts on both your interest rates and repayment schedule. While a single, lower monthly payment may be convenient, it could also extend your repayment term without offering any overall savings. You may also have the opportunity to refinance your federal student loans with a private lender, but know that there are potential downsides, such as giving up the benefits and protections offered by federal loans.

You might also want to use this time as an opportunity to take another look at your specific repayment plan and what other options you may have. Depending on your financial situation, you may be eligible for alternative plans, such as income-driven repayment plans, that could potentially be a better fit.  

4. Reassess Your Budget

Before payments resume, you’ll want to confirm what exactly you owe. While you may assume that your monthly payments will be the same as they were beforehand, that won’t necessarily be the case—particularly if you consolidated your loans while the pause was in effect.

Once you’ve determined what you’ll owe each month, make sure that your budget accounts for those required minimum payments—plus a bit more, if possible. If your financial situation changed during the pandemic, you may need to shift some things around in order to find room in your budget to prioritize paying down your debt. 

5. Ask for Help

If your monthly payments still feel unmanageable, check to see if your employer offers any student loan-related benefits. You may also qualify for debt relief based on your profession, such as public service or health care.

If these options don’t apply, or you aren’t eligible for an income-driven repayment plan, consider reaching out to your loan servicer. They can walk you through your options—such as applying for a deferment—and answer specific questions you may have.  

6. Protect Yourself

As payments resume, be wary of an increase in attempted scams trying to take advantage of borrowers. Remember that no one should ask for your student loan account PIN or password. 

The Bottom Line

We understand that paying down student debt can be a challenging prospect, especially after years of paused payments. To help you get back on track, keep these strategies in mind as you readjust and move forward on the path to your goals.