What you need to know:
- If you were making auto-debit payments before March 13, 2020, they won’t automatically restart.
- Your loan servicer might’ve changed, don’t assume it’s spam if you’re contacted by a new servicer.
- If your circumstances have changed during the pandemic, consider a new student loan repayment strategy.
Student loan administrative forbearance — the pandemic relief effort which paused payments and student loan interest on federal student loans — will officially end on January 31, 2022.
Once your payment suspension ends, you’ll receive a billing statement at least 21 days before you need to make your first payment. Readjusting student loan payments again can be stressful, and it’s easy to unnecessarily complicate the process if you’re not paying attention.
Here are the five biggest mistakes to avoid when payments restart.
Mistake 1: Forgetting to update your contact information
There are a lot of reasons why your contact information might’ve changed during the pandemic, and it’s easy to forget to update those details within your student loan accounts.
For example, if you originally used a work email address as on your student loan profile, it might not be valid if you no longer work with that employer. Similarly, you might’ve moved during the pandemic, so snail mail correspondences might be misdirected or lost.
One of the common student loan mistakes we anticipate is regarding auto-debited student loan payments. If you were on auto-debit prior to March 13, 2020, your payments won’t restart automatically. Instead, your student loan servicer will contact you in advance to confirm whether you still want to make auto-debit monthly loan payments. If they don’t hear from you, your payments won’t resume even though you’ll still owe money.
Make sure you update all of your information through your loan servicer’s website and within your StudentAid.gov account.
Mistake 2: Not updating your payment information
It’s crucial for federal student loan borrowers to update payment information before payments on federal school loans resume, particularly for auto-pay. To stay on automatic payments, you might have to take different actions depending on the status of your loan.
Action to take
On auto-debit before March 13, 2020
Your servicer will contact you before payments resume to confirm that you want to stay on auto-debit.
On auto-debit after March 13, 2020
Auto-debit will resume on your first due date when payments begin again, so you don’t need to take any immediate action.
Remember to update your bank account details if it’s changed, then make sure payments have resumed by your first due date.
Didn’t do the payment suspension, on auto-debit (applies to Perkins Loans, too)
Loan in default
Perkins loan and not on auto-debit during suspension
Your loan servicer will initiate contact to confirm auto-debit, you must respond to your loan servicer before auto-debit will resume.
Mistake 3: Updating your tax return without considering student loan implications
Your adjusted gross income from your most recent tax return will be used to recertify your income for an income-driven repayment plan. If you’re in a rush to file your tax return, there’s a possibility you could end up shooting yourself in the foot during this process — depending on your scenario.
If you earned more in 2021 than you did in 2020, and are hoping for loan forgiveness, delay filing your 2021 return for as long as possible. This way you have a better chance to use your 2020 return when calculating your IDR payment since many borrowers recertify their incomes alongside the restarting.
This strategy gives you a lower IDR payment and saves you money.
Mistake 4: Ignoring correspondence from your new servicer
Chances are your loan servicer could’ve changed throughout the pandemic — you might be getting new letters or phone calls from a servicer you haven’t heard of before. Don’t automatically assume it’s spam.
If your servicer has changed you’ll be contacted, your new servicer will contact you via email or snail mail to let you know about the federal loans transfer. This welcome letter should include the contact information for your new servicer.
Remember: Neither the Department of Education nor your student loan servicer will ever ask for your FSA ID password. If you’re asked to provide that information, it’s definitely a red flag that you’re probably talking to a scammer.
Always verify your servicer through your FSA account. Go to the “My Aid” section and click on “view servicer details.” Alternatively, you can call the Federal Student Aid Information Center at 1-800-433-3243.
If your loans aren’t owned by the Education Department, you might have to do additional digging to verify your servicer. If you have a federal Perkins Loan, contact your school as it might be your servicer. Or, if you have a FFEL, look for written correspondence with your account information such as due dates and amount owed.
Remember, if your loan servicer can’t confirm that you still want to make auto-debit payments, your payments won’t automatically resume. This doesn’t mean that you won’t owe the money — you’ll actually fall behind on your payment plan, and might incur a late fee. Paying attention to these correspondences is very important.
Mistake 5: Panicking
There’s a lot of stress involved with student loan repayments restarting. If your circumstances have changed during the pandemic, your current repayment plan might not be the best strategy for you anymore.
Changes in family size, income, and occupation could have an impact on how you tackle your student loans. Perhaps you now work for a nonprofit or government agency and can participate in the Public Service Loan Forgiveness program.
Being anxious is also natural as you figure out how you’ll fit your student loan debt into your current budget. You might need to make adjustments to your household spending or find a different repayment solution.
Instead of panicking, reach out for help. At Student Loan Planner we’re experienced in finding solutions for many niche scenarios — chances are we’ve already seen a repayment situation that’s similar to what you’re dealing with. We thrive on optimizing student loan repayment strategies to fit your life goals.