Federal student loan relief is ending. Here’s how to prepare


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After a break of over two years, borrowers will restart federal student loan payments in January 2023. Before the new year arrives, it might be wise for borrowers to have a strategy for repayment.


In March 2020, as the Covid-19 pandemic struck, the federal government ordered the suspension of payments, interest, and collections on most federally held student loans. The most recent extension of the moratorium for more than 40 million borrowers takes it through December 31, 2022.


Some 20 million federal student loan borrowers apparently won’t have to worry about repayments anymore. That’s because President Joe Biden’s administration has announced $20,000 in debt forgiveness for individuals with annual incomes below $125,000 who received a Pell Grant in college. (The annual income cutoff is $250,000 for married couples or heads of households.)


Other federal student loan borrowers who did not receive a Pell Grant in college will receive $10,000 in student debt forgiveness if their individual incomes fall below $125,000. (The cutoff for $10k debt relief is also $250,000 for married couples or heads of households.)


The U.S. Department of Education argues it has the legal authority to implement debt cancellation under the Higher Education Relief Opportunities for Students Act of 2003, also known as the HEROES Act. The Biden administration’s debt relief plan, however, may face legal challenges in federal court.


“Legal challenges are expected,” according to The New York Times’ reporting. The threat of legal action means it’s unclear whether the courts will uphold or overturn the Biden administration’s broad student loan forgiveness plan.


If the debt forgiveness edict goes forward as planned, most eligible borrowers may have to provide the Department of Education with income information to claim the relief. The department said it has income data on nearly 8 million borrowers who may automatically receive the forgiveness without lifting a finger.


Getting $10k or $20k in federal student loan forgiveness will either eliminate your federal student loan debt balance or reduce the amount of principal you owe. The White House may announce more details in the coming weeks on exactly how the program will work in practice.


Related: Can the president cancel student loan debt?

Loan Repayment Transition

The student loan repayment transition may not be easy for some borrowers. A survey ​conducted for Pew Charitable Trusts in 2021 found that 67% of borrowers said it would be difficult to afford their student loan payments if they resumed the next month. And about half weren’t aware of when they would be required to resume payments.


Below are some tips on how to prepare for the end of the student loan payment pause:

Update Contact Info and Prepare for Your Bills

To prevent any delays and smooth out the process, make sure your contact information is up to date in your profile on your loan servicer’s website and your Federal Student Aid account.


Once the pause is over, expect a billing statement from your loan servicer. You will get the stats on your due date, interest, and payment amount. If you participate in autopay, make sure that is set up with your latest bank info.


If you have questions that can’t be answered online, you may call the Federal Student Aid Information Center at 800-4-FED-AID (800-433-3243).

Find the Best Plan for Your Income

Apart from the hardships caused by Covid-19, the federal government has made exceptions and provisions for borrowers in recent years. You may want to see if you qualify for any of the programs.


The Department of Education offers income-based repayment, which also considers family size (both factors must be recertified every year).


Almost all federal student loans are eligible for at least one of the four repayment plans:

  • Pay As You Earn
  • Revised Pay As You Earn
  • Income-Based Repayment Plan
  • Income-Contingent Repayment Plan

For the first three plans, payments are generally 10% percent of your discretionary income. The plans stretch payments over 20 or 25 years and forgive any remaining balance. (Anyone enrolled in a plan and the Public Service Loan Forgiveness Program may qualify for forgiveness of any remaining balance after just 10 years of payments while working full time for a qualifying employer.)


If you are already in an income-driven repayment plan but your income changed recently, you can update your information to see if you can get a new, lower payment amount.

Explore Other Federal Programs

Do you work for a nonprofit? Is your job in the public sector? Borrowers who are part of the Public Service Loan Forgiveness Program are to receive credit for suspended payments if they have a federal Direct Loan and work a minimum 30-hour week for a qualifying employer.


Teacher Loan Forgiveness is another federal program that can provide eligible educators with up to $17,500 in federal student loan forgiveness.

Restart Payments Early

Some borrowers in a position to resume student loan payments have already done so, or continued to make monthly payments even though it wasn’t required. This move allowed them to take advantage of 0% interest and likely pay down the principal on their student loans.


It’s not too late to take action. If you decide to resume payments before Jan. 1, 2023, contact your loan servicer or go to its website to restart payments. It may also be a good idea to ensure that any payments made during the relief period are going to the principal of the loan.

Consider Consolidating Loans

Consolidation allows borrowers with more than one federal student loan to combine them into a single loan with a fixed interest rate that is the average of the rates of the loans being consolidated (rounded up to the nearest one-eighth of a percentage point).


Borrowers may see a change in monthly payments when they consolidate their loans into a Direct Consolidation Loan, but one of the biggest benefits is convenience. Instead of multiple loans to track each month and multiple payments, there is one payment a month, at a fixed interest rate.


The loan term also may be elongated, to up to 30 years, but a longer term generally means making more payments and paying more in interest than would be the case if you hadn’t consolidated. It’s important for borrowers to consider the length and interest paid overtime, as well as the monthly payment, to assess whether consolidation makes sense for their financial goals.

Explore Student Loan Refinancing

If you refinance your student loans with a private lender, a new, private loan — ideally with a lower rate — will pay off your original loans. Refinancing may be right for you if you can lock in a lower interest rate.


One important thing to note is that refinancing federal student loans means the loans are no longer subject to federal benefits like income-driven repayment, Public Service Loan Forgiveness, or federal forbearance.


Also, it’s important to read the fine print and compare offers among lenders.


Comparing options, plugging in numbers, and weighing different scenarios based on your current financial picture and your goals may be helpful in assessing whether refinancing is a good option for you.

The Takeaway

The Biden administration’s plan to forgive up to $20k of a borrower’s federal student debt would still leave some borrowers with a sizable loan balance. Understanding the repayment options available can help borrowers strategize to handle their debt when the federal payment and interest pause ends.


Learn More:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.


SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
In our efforts to bring you the latest updates on things that might impact your financial life, we may occasionally enter the political fray, covering candidates, bills, laws and more. Please note: SoFi does not endorse or take official positions on any candidates and the bills they may be sponsoring or proposing. We may occasionally support legislation that we believe would be beneficial to our members, and will make sure to call it out when we do. Our reporting otherwise is for informational purposes only, and shouldn’t be construed as an endorsement.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

More from MediaFeed:

9 smart ways to pay off student loans


No one ever wants to talk about the unglamorous work that goes on behind the scenes, but it’s the unspoken progress that makes or breaks every successful business owner, athlete, or creative person. It is helpful to have this mindset and to think about student loan repayment like any other big feat worth accomplishing.

It begins in knowing that paying down student loans in a way that is financially smart and effective takes time and effort, most of which lies in the preparation — the proper planning, budgeting and education will make tackling your student loans during the next decade or more so much easier.

While there is no one single smartest way to pay off student loans, there are steps that you can take that will put you in the best position to pay off your student loans on a timeline and with terms that work best for you. In addition to understanding your student loans, your goal should be to build an overall financial plan that includes your loans.

Related: Why your student loan balance never seems to decrease

9 ways to pay off student loans

If you want to understand how to repay student loans in the smartest and most financially responsible way possible, here are nine steps to implement in your loan repayment plan.


jacoblund / istockphoto


Keeping track of all of your student loans and other sources of debt can be tricky, especially if you are a recent graduate. Your first step should be to organize them on a list. On your list should include the loan service provider (the bank, federal government, or private lender), amount of the loan, monthly payment, interest rate and when the loan will be paid off in full.

If you aren’t sure what your monthly payments on your student loans will be, you can use our student loan calculator. This calculator estimates how much you could be paying each month on your student loans.

If you have credit card debt or other personal loans, include these on your list. With all of your sources of debt, mark on a calendar the date that the monthly payments are due.

While you always need to make the monthly minimum payments on all debts (unless your student loans are within their grace period or are in forbearance), listing them out allows you to identify which debts to pay off first. If you have high interest credit cards adding up each month, a credit card consolidation loan may be a great option to look at.

Once your credit cards are paid off, you’ll want to think about whether your goal is to pay your loans off quickly, or to simply make the monthly payments until the loans are done. The former is a good way to save on interest over time.

Some folks do prefer to pay only the minimum monthly amount on their student loans so that they can save and invest while they pay down their student loans.

If the interest rates on your student loans are low, this may be a good reason to start investing with your extra funds, in order to take advantage of compound returns. If the interest on your loans is higher than you could reasonably expect to make investing, it might make more sense to pay off your loans first. Which option is right for you is a completely personal decision.




No matter who you are, learning how to budget your money should be on the top of your financial to-do list. It takes time and effort to develop a budgeting system that works for you, but it is doable, and totally worth it. To get started, track your monthly cash inflows and outflows for two months.

Total up how much money you spent in each category, including debt payments like student loans. Once you have a general idea of what you’re spending in each category, you can begin to build a budget framework. For example, if you spend $260 on groceries one month and $300 the next, you can now set yourself a realistic grocery budget. Leave room for annual, bi-annual and quarterly expenses, as well as incidentals.

With a budget that is built to include student loan payments, you’ll be more equipped to make all of your payments on-time and know how much is available to spend on other needs and wants. Also, understanding exactly how you’re spending allows you to identify the areas where you’re overspending.

For example, a close look at your budget could reveal that you’re spending more than you realized on dining out, subscriptions, clothing, or even rent — and gives you the power to make a change. And by saving money in other categories, you’ll free up money to apply to your financial goals.




Hopefully, your student loans are already set up to be automatically deducted from your bank account. (This is a good strategy for all your monthly bills.) If they aren’t, contact your student loan service provider to set it up. This way, you’ll never miss a payment because you forgot or are somewhere where you can’t access the internet.

Remember, every time you miss or are late on a payment, it negatively impacts your credit score. Bad credit could preclude you from opportunities in the future, such as being able to refinance your loan to a lower interest rate. Take every extra precaution to make sure your loans get paid on time.

As an added bonus, some service providers offer a discount, usually.25%, if you arrange to pay by automatic payments. When you sign up, be sure to ask if such a discount is available.


Youngoldman / istockphoto


Most student loans allow you to pay more than the minimum monthly payment, and doing so can be a great strategy if your goal is to pay back your loan faster than the stated term. In addition to a faster payoff, you can save on interest over the life of the loan. Even small amounts make a difference. One drawback is that some providers have prepayment penalties. When you contact you student loan service provider, be sure to ask if they charge such fees.

To do this, call your loan service provider to adjust your automated monthly payment to a higher amount, and clarify that you want that money dedicated to the principal of the loan. Make sure, after the next month’s payment, that the money was indeed put towards the loan’s principal.

Looking for more advice on paying down your student loans? SoFi’s student loan help center offers tips, guides and resources on all things student loans.


Deposit Photos


Increasing your monthly payment isn’t the only way to put a dent in your loans; at any point, you are allowed to make a lump sum payment towards the principal of your loan. This is a great way to speed up the student loan repayment process without having to commit to paying more each and every month.

You may have more opportunities to do this than you think: Utilize your tax refund, holiday money, birthday money, work bonuses or inheritance money. Additionally, putting income from a side hustle or other passive income towards student loans could be a financially rewarding move over the long-term.




Most federal student loans come with a standard, ten-year repayment plan. With federal loans, there are other options for repayment plans with lower monthly payments, calculated using your income. These plans lower your monthly payments by extending the length of your loan, usually from ten years to twenty or more years.

When you choose one of these options, it is important to know that even though your monthly payments are lower, you can end up paying more in interest over time. Therefore, it’s not a great choice if you want to pay off your loans quickly or pay as little in interest as possible, but it is available to those who are having trouble making their monthly payments.

If you are planning to utilize the Public Student Loan Forgiveness program for your federal loans, you will need to select one of the income-dependent repayment programs.




When you refinance a loan or multiple loans, a lender pays off your current loan(s) and provides you with a new loan, ideally at a lower rate. A lower interest rate could mean savings over the life of your loan.

Though refinancing might not be the right option for everyone, it’s a strategy that every student loan holder should, in the very least, research and consider. Also, understand that while refinancing can consolidate multiple loans, federal loan consolidation is a different process. With federal loan consolidation, the government bundles your loans together into one, using a weighted average of the interest rates.

If you are able to refinance to a lower rate, you will want to ask yourself whether the purpose is to lower your monthly payment but keep the same term, freeing up some money in your monthly budget, or to keep your monthly payment the same (or higher) and to shorten your term so that you can pay off your student debt faster.

Exploring refinancing with a private lender usually doesn’t take a lot of time and it doesn’t cost you anything.


Drazen Zigic/istockphoto


With all raises, you can use the extra income towards your financial goals. This could mean increasing the monthly amount you pay towards your loans, making the occasional lump sum payment towards the loan with the extra windfall, and/or saving and investing money for your other long-term financial goals.

How much money you earn is an important factor contributing to your financial stability and ability to pay down your student debt. While budgeting is important, so is knowing your worth and asking for more when you deserve it. If you haven’t already, start keeping track of your successes now so that at your next compensation conversation, you’re loaded with concrete data on why you deserve a bump.


fizkes / istockphoto


Although not yet as widespread as retirement or healthcare benefits, more employers are offering student loan repayment help as a benefit to attract and retain employees.

Depending on your personal situation, student loan repayment help could be as important than a raise or other benefits. Whenever you’re comparing job offers, it’s critical to understand and compare benefits packages, because although they’re not flashy like a big salary or company equity, benefits can be just as valuable.

If you’re looking for a new job, include student loan repayment help in your search. While it shouldn’t be your only consideration, it’s great to have an idea of what you’re looking for in an employer.

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.




Featured Image Credit: CREATISTA / iStock.