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By Mary Jo Terry
August 28, 2023
More than 600,000 parents take out student loans for their children each year, not to mention the billions of dollars parents owe on their own student loans. Despite having a break for over three years on payments, time is officially up. Beginning in October, student loan payments will resume, meaning parents have a short time until they enter an even more financially challenging time. Here are a few tips that those with student loans should begin following now to prepare for student loan payments to restart:
Verify your loan balances with your lender
Contact your lender and verify that the loan data they have for you is correct and matches your records. After years of monthly payments, many of us have likely set up an automatic payment process and may not be keeping a close eye on our student loan debt. Without having to input our payment information each month ourselves for years, the current balance could be lower than expected. Knowing the current balance is crucial to understanding what you have left and makes the next step easier, hopefully, to pay off those student loans quicker. You may even surprise yourself and already be paying more than the minimum each month – if you are, keep it up!
Calculate your repayment responsibility and budget your repayment properly
Make sure your current repayment plan will fit within your budget, especially if you are on a fixed income. Student loan payments are a monthly payment; they should constantly be factored into your budget. If your finances have changed even the slightest bit (you owe a hundred dollars, a couple hundred, your income has recently changed, you’ve retired in the past few years, you’ve been paying the minimum or even a little more), it’s important to calculate how much you can pay each month towards your student loans. You may be able to make a higher monthly payment than you did when you first took out the loan.
If needed, get into the right IBR program
The federal government has a myriad of Income Based Repayment (IBR) plans or programs available to help borrowers of all financial backgrounds. These programs will look at your income and decide what an appropriate student loan payment would be each month. They’re beneficial for borrowers with a large amount of debt, typically with a low monthly income. After 25 years in an IBR program, your remaining student loan debt is forgiven. Usually, when you apply and are accepted to an IBR program, your payments will be very little, and in some cases, you could even owe nothing each month. However, if you get into an IBR program, it will likely take longer for you to pay off your student loans and you could be paying more on the loan over time. Consider first what other options you have before applying for these programs.
Update your information
Updating your information can be a crucial, yet simple step to the process. If you’ve moved since your last payment, have a new job, new contact information, and even new bank account information, now is the time to contact your lender. If you were on auto-payments each month you need to verify whether or not you can still afford to have that turned on, or if your account or card number is even the same. Take the time to go to studentaid.gov to update your information accordingly and ensure you have everything prepared ahead of time. The information also needs to be updated on your loan servicer’s website. Knowing your loan servicer’s information is important for you to know, as your loan servicer is likely to have changed.
Prepare for scams
Student loan forgiveness is always in the news; scammers are likely to take advantage of borrowers with false promises of forgiveness and help paying your student loans.
Here are a few easy ways to spot a scam:
- Asking for money upfront:
It is illegal for any debt relief company to collect fees from a customer before settling their debts.
- Pressuring you to act:
Anytime someone urges you to work with them or uses the words “limited time” they’re likely a scam.
- Asking for your personal information:
No personal information should ever be given to anyone and those who are really a part of debt relief efforts will already have that information from your accounts.
If you experience any of these warning signs during a call or email chain with a company, end contact immediately and do your part to report the case to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov. Let them know if you’ve given any personal information, and they’ll be able to help you and work to stop the scam. It’s also important to alert your banking services about potential fraud activity that may occur on your account.
Related:
5 Tips to Make Your Student Stand Out to College Admissions Counselors
Letting Go: Some Tips for Parents of Future Adults
Helpful Financial Aid Resources to Pay for College
