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Preparing for federal student loan payments resuming early next year

In August, President Joe Biden's administration announced one more extension of the pause on federal student loan payments, lasting until January 31, 2022.

AUGUSTA, Maine — If you're a graduate in debt, you may have received an email this week from your federal student loan servicer, reminding you that in about three months, payments will pick back up again. It's another way life is returning to some kind of normal, following the pandemic.

In August, the Biden administration announced it would extend the pause on federal student loan payments one last time until January 31, 2022. After that date, all repayment and accrual of interest will resume, as well as collections on loans that defaulted before the pause. That means for many, their next payment will be due in February or March. so experts want to make sure you're prepared.

"Almost two years will have passed before borrowers will need to begin making payments again, and so they will really need to reestablish that habit of re-paying their loans every single month," said Mary Dyer, the financial education programs manager at the Finance Authority of Maine. "For many borrowers, that loan payment has perhaps been redirected to other expenses, and so it's going to be a little bit harder to re-establish that."

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Dyer has some tips for borrowers, as they prepared for this change. They include:

  • Contact your student loan servicer to make sure contact information is current and up-to-date. Dyer says you can do that now and should be persistent since servicers are likely dealing with a lot of borrowers in a similar position.
  • Visit studentaid.gov and log in with your federal student aid ID to update contact information there, too. Dyer says that way, your servicer can reach you easily if needed. There's also a loan simulator tool on that site where you can explore different repayment plans. It's especially helpful if you're having trouble making the first payment. 
  • Find out what your anticipated payments and due dates might be by contacting your servicer. If you can, it may be easiest to set up automatic payments, as a way to re-establish and maintain the habit of paying regularly. 
  • Be proactive by setting aside monthly payments now to get back into the routine, and make sure you have the money available. It's important to make consistent, on-time payments. 

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Dyer says she does anticipate there will be some challenges, since there are about 42 million student loan borrowers nationwide, and this two-year pause was unprecedented.

"If you think about it sort of with the analogy of going to the gym, once we establish that daily going to the gym habit, we get in a really good groove," Dyer explained. "Then, as soon as something happens to kind of put a pause on that, whether it's vacation or something interrupts that habit, it's so hard for us to get back on track, and student loans are very, very similar in that sense."

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Dyer said some borrowers may still be experiencing economic hardship, and there are other options if you can't repay your loans right away. You can find out about those through your servicer. She said you should start by paying off other debt, increasing what you have available in cash and savings, and building up an emergency fund. If you have federal and private loans, you should compare their interest rates and try to pay more on the loan with the higher rate. 

Dyer said borrowers should also be wary of student loan scams. If you receive a phone call from a company promising loan forgiveness and repayment assistance, you should be cautious, and reach out to your servicer or FAME before doing anything. 

RELATED: Student loan payment pause extended into 2022 by Biden administration

FAME has a number of financial wellness tools available online. You can find out more about those by clicking here