How to manage your student loan payments
October 26, 2023
The COVID-19 payment pause has ended, and federal student loan payments are due again. Most borrowers saw interest resuming on September 1, 2023, with payments due in October. The Federal Student Aid (FSA) office understands that everyone’s financial situation is different. They have several different repayment plan options to fit many different needs. If you are one of those who are concerned about the restart of student loan payments, there are many resources on studentaid.gov that can help you explore which repayment plan is best for you.
Additionally, Webster First has some tips to offer on how to budget and save to make managing debt easier for you.
Resources & Repayment Plan Options
FSA offers eight different repayment plan options.
- Standard Repayment Plan
- Graduated Repayment Plan
- Extended Repayment Plan
- Saving on a Valuable Education (SAVE) Plan
- Pay As You Earn (PAYE) Plan
- Income Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
- Income-Sensitive Repayment Plan
Some types of loans are eligible for certain repayment plans but not others. Use FSA’s Loan Simulator to compare plans and help you choose the one that best fits your needs.
Formerly the REPAYE Plan, the Biden-Harris Administration made some changes and launched the SAVE plan in 2023. Touting it as the most affordable student loan repayment plan ever. Here are some quick facts about the plan which come straight from the FSA link above. Visit their page to learn more.
- The SAVE Plan decreases monthly payments by increasing the income exemption from 150% to 225% of the poverty line.
- Your monthly payment amount is based on your discretionary income—the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline
- If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month. This means that the SAVE Plan prevents your balance from growing due to unpaid interest.
- The SAVE Plan excludes spousal income for borrowers who are married and file taxes separately. Previously on the REPAYE Plan, your spouse’s income was included as part of the total income used to determine your monthly payment amount.
- Under the SAVE Plan, your monthly payment could be as low as $0.
- More elements of SAVE will go into effect in summer 2024 and will lower payments even more for borrowers with undergraduate loans.
- Student Loan Repayments to Resume in October 2023 | MyCreditUnion.gov
- Prepare for Student Loan Payments to Restart | Federal Student Aid
- Repayment Plans | Federal Student Aid
- Student Loan Forgiveness | Federal Student Aid
- Blog | Consumer Financial Protection Bureau (consumerfinance.gov)
How to manage your student loan debt
Whether you have a family that you need to feed, or you are a recent graduate not making quite enough money yet, there are many reasons some may not be able to afford their student loan payments. But student loans will affect your credit score and your debt-to-income ratio.* Two things that are very important if you want to take out a loan or mortgage. For that reason, you won’t want to leave them unpaid now that payments have resumed.
An easy way to make sure your loans are paid on time is to set up autopay, which can also give you a discount of 0.25% on your payment depending on who is servicing your loans. If you were enrolled in auto pay before the payment pause, you’ll likely need to re-enroll now.
Once you’ve taken the first step to choose which repayment plan will work for you, the next step is to come up with a plan for debt payoff.
Money Management Tools & Debt Payoff Strategies
Webster First members are eligible to enroll in online and mobile banking. With your Webster First checking account hooked up to the Money Management tool, your transactions can be tracked and marked with categories such as home, food & dining, entertainment, etc. (you can create any custom categories you want). This tool is free to use, unlike similar budgeting services that exist.
To get yourself out of debt as fast as possible, try different debt payoff strategies. If high interest credit card debt is holding you back from making your student loan payments, the debt avalanche strategy may be a viable option for you. Read about debt avalanche and more debt payoff strategies in our article How to Pay off Debt Faster. There, you’ll also find tips to cut down on monthly spending.
Our Debts tool within Money Management can forecast debt payoffs, showing you a timeline for which you can achieve your goals. Whether that be to apply for a mortgage, or to just be debt free. You may also want to consider debt consolidation. A home equity loan or line of credit could help you move all your debt payments to one place, with one interest rate. Personal loans can be used for debt consolidation as well. Use the debts tool to compare strategies and decide which is best for you.
*Your debt-to-income ratio is your total monthly debt, divided by your gross annual income. The percentage from that ratio, along with your credit score, are two major deciding factors for whether you are approved for a loan.