Navigating the world of student loan repayment can be overwhelming, especially when you consider many borrowers have not needed to make payments for over three years. Over 30 million federal loan borrowers must start or restart their student loan payments. Of the 30 million, an estimated 13 million have never had to make repayments due to the length of the National Forbearance.
In this comprehensive PayForED guide, we’ll walk you through every step of the student loan repayment process, ensuring you have all the tools and knowledge needed to tackle your debt head-on. We will explain the most common loan terms and the various options so that you can develop a personalized repayment strategy that fits your financial situation.
Whether you’re a recent graduate just entering repayment or a borrower struggling for years, this student loan repayment checklist will break down the complex world of student loans into manageable tasks. Get ready to regain control of your finances and make progress towards a debt-free future.
Steps to take before you start to repay your student loans
Before the restart begins, you must evaluate where you are and changes that may have occurred during the COVID-19 National Forbearance. Life events such as employment changes, marriage, or children could significantly impact which repayment methods to consider. A change in income will be critical for those who use or are considering an Income-Driven Repayment (IDR) method.
Confirm Your Contact Information on StudentAid.gov
The first thing you need to do is confirm your contact information is current. The best place to do this is on the StudentAid.gov website. This Department of Education (DOE) website provides most of your student loan and prior federal financial aid information. The borrower will need their FSA ID and password to access this system.
If you, the student, used Parent PLUS loans, these will be listed under the parent’s FSA ID and not the student’s. Parent PLUS loans are legally the parents and have more restrictions than the student repayment methods.
Protect Your FSA ID and Password
You should never give your FSA ID and Password to a random person. The FSA ID is your electronic signature to many federal financial aid services. Many phone scam loan repayment services will ask you for this information, which seems harmless. They can access your social security number, birthday, address, and other personal identifying information by knowing your FSA ID and password.
The StudentAid.gov site has other important information like your loan details, loan servicers for each loan, current loan balance, interest rates, and other loan details. You can also perform various consolidation, repayment, and forgiveness functions on this site.
Match Your Contact Data if Possible
Due to the new IRS integration, the mailing address is recommended to match the address information on the 1040 if it is current. Other items would include email address and cell number. The DOE is moving to a double authentication process to increase security.
The StudentAid .gov site is not your loan servicer site. That is where you make your payments, and that login information is different. We recommend that your student loan servicer’s contact information matches your StudentAid.gov information.
Understand Your Current Repayment Method and Monthly Amount Due
Before diving into the steps to restart your student loan repayment, it’s essential to understand what exactly this means. With the October 1, 2023, restart, the borrower’s payments will be the same amount as if the National Forbearance never happened. The only exception is for those who have made changes through their loan servicer or on the StudentAid.gov website. A perfect example would be a borrower who enrolled in the SAVE program.
You can verify the payment amount in two places. The first would be to contact your loan servicer. If you have multiple servicers, you must contact each one. You can also use the StudentAid.com site and download your student loan data via a .txt file. This text file will provide you with all the loan data, but it can take time to understand.
You could also contact a financial professional specializing in student loan repayment and forgiveness. On the PayForED site, we have a list of financial advisors trained in these complex processes. They have a FINRA-listed designation CFSLA or SLRA advisers who are trained in the Student Loan Repayment & Forgiveness strategies. The training courses are CFP-approved courses. They can answer the personal financial questions that the loan servicers cannot legally address.
Get an Inventory of Your Loan Types and Status
Your types of student loans will dictate your repayment and forgiveness options. Borrowers need to know their loan status since some borrowers may have a combination of loans in various stages.
For example, a borrower may have their loans and a Parent Plus loan for their child in school. The Parent PLUS loan would have a status of In-School Deferment while their loans would be in repayment and be the only loans that require payments.
IDR Users Need to Know their Income Recertification Date
For those enrolled in an IDR method, you should identify your IDR Anniversary date. You can contact your loan servicer, or it is listed in your loan text file export. The formal IDR recertification process will start on March 1, 2024.
With the increased use of IRS data and IDR payment methods, understanding the time is becoming more critical. For borrowers using the IDR methods, proper tax planning and filing time need to be considered. This planning is especially true for married couples who have student loans.
Current Tax Return On File
With the increased use of IDR and the new IRS integration, it is critical that IDR users understand how they have filed their taxes and determine if that matches the most optimal repayment method.
This advice planning is a shortcoming of the loan servicers. The loan servicers cannot provide any personal financial or tax advice. At the same time, more borrowers are using the Income-Driven Repayment methods. As a result, the loan servicers may not be giving you complete advice.
Under current rules, the IRS integration into loan repayment is an Opt-In decision. It will make the income recertification process easier and will require better tax planning. The new integration also reduces paperwork in the IDR process but ensures the tax information is correct.
Review Your Student Loan Repayment Options
Over the three and half years of COVID National Forbearance, many borrowers had significant changes in their lives, like marriage, employment changes, or children, to name a few. All of these could impact your loan repayment decision, and there could be a better repayment option now.
These events could be especially true with the new SAVE method, but you need to do your homework before making that change. Borrowers need to realize that a change in repayment method will result in a new income recertification request.
This decision is why the prior two steps are critical to know before making that SAVE decision.
The DOE did not require income recertification during COVID to simplify the process. Some IDR borrowers’ payments could be based on 2019 income as repayment starts. The income recertification timing will allow them to maintain a lower payment until their new IDR recertification data. This review could be good or bad since some borrowers could see a significant increase in payment if their income has changed and they are using an IDR method.
New Borrowers Need to Confirm Their Payment Method
Approximately 13 million borrowers will be entering the repayment and loan servicer process for the first time due to repayment delay. It would be best to take action since the default repayment is the 10-year Standard Rate. For most, that will be the most expensive.
You should evaluate all your repayment and forgiveness options using the steps above. Loan repayment is a complex process, and with the volume of borrowers returning simultaneously, getting access to the loan servicers may be difficult.
Confirming Your Auto-Payment Information
Over 18 million borrowers changed loan servicers during COVID. There is a 0.25% reduction in your interest rate if you enroll in the automatic withdrawal payment process. Borrowers need to reconfirm that their information is correct. This payment enrollment would be done on your loan servicer site rather than the StudentAid.gov site.
Student Loan Repayment Checklist Summary
This list of student loan repayment items is critical to an easy repayment restart. Due to the increasing complexity, we at PayForED see more borrowers needing help navigating this process. You do not want to default or have late payments. This student loan repayment checklist will help you make informed decisions.
The federal system does offer the most repayment flexibility and loan forgiveness options. You will also need to be patient since the volume of calls and the level of support will be tested. As stated above, the loan servicers are limited in the advice they can provide, especially for IDR users.