Yes, they will come back (eventually). Payments on federal student loans, on pause since the spring of 2020, will resume May 1st. Needless to say, you need a plan. If your financial circumstances have been largely unaffected by the pandemic or you have recovered from a financial lull, start subtracting an amount equal to your old monthly payment and “pay it” to your savings account. Use these final months to “re-train” your budget to accommodate this monthly payment. If you have absorbed your student loan payment into your regular spending, now is the time to wring it out. You must be able to identify now the specific change that you will make in your spending habits to accommodate your student loan payment when it resumes.If your finances have deteriorated with the pandemic, perhaps due to a loss of income and/or increased child care costs, you must be proactive in addressing this situation:
But what if your finances have actually improved since you last made a payment, and you are sitting on “excess savings”? Until the end of the payment pause, the interest rate on your federal loan is set at zero. Any payment that you make during this time will go entirely to the principal portion of the loan. Assuming that you are not seeking eventual loan forgiveness (for example, under the Public Service Loan Forgiveness program), extra payments now could make a meaningful dent in your balance. Of course, this only makes sense after you have taken care of the essentials: funded an emergency fund, eliminated high interest debt, put your retirement savings on track.So, what’s your plan? If you don’t have one, contact a member of the Your Money Line team. We can help you meet the moment!