The Return of Student Loan Payments

A pandemic reprieve on student loan payments ends in January. If you still need financial help, there are steps you can take.

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If you have federal student loans, you’ve probably seen e-mails reminding you that payments will restart after January 31. During the pandemic, the federal government suspended payments on federal student loans, with no interest accrual on loan balances.

If your budget can’t handle payments on your federal student loans, you may be eligible to lower them by enrolling in an income-driven repayment plan. There are several IDR plans available through the Department of Education, but all base your monthly payments on your earnings. If you’re already enrolled in an income-driven plan and your income has declined a lot, you can also ask your loan servicer to recertify your income and recalculate the payment.

You can apply for an IDR plan on the federal Student Aid website (opens in new tab) and select the plan you qualify for with the lowest monthly payment. You may pay more in interest because you’re extending the repayment period, but after 20 years of payments, you may be eligible to have the balance forgiven.

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Another option is to re­finance your loans with a private lender. At below 3%, interest rates are enticing. But read the fine print on any offer you consider. Some plans offer low interest rates in the first year and hike them later. To avoid interest rate hikes down the road, look for a low fixed rate rather than a variable rate.

If you can’t afford to make payments, you may qualify for deferment or a forbearance. There are two types of deferments: economic hardship and unemployment deferment. You must be out of work to qualify for the unemployment deferment, but you may qualify for economic hardship if you receive federal or state public assistance, you’re a Peace Corps volunteer, you work full-time but earn less than or equal to the federal minimum wage, or you have income that’s less than or equal to 150% of the poverty line for your family size and state (about $26,000 a year for a two-person household).

Emma Patch
Staff Writer, Kiplinger's Personal Finance

Emma Patch joined Kiplinger in 2020. She previously interned for Kiplinger's Retirement Report and before that, for a boutique investment firm in New York City. She served as editor-at-large and features editor for Middlebury College's student newspaper, The Campus. She specializes in travel, student debt and a number of other personal finance topics. Born in London, Emma grew up in Connecticut and now lives in Washington, D.C.