How To Prepare For When Student Loan Payments Resume on January 1st

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Since March, federal student loan payments have been paused with interest rates set to 0% as part of the CARES Act. Pending an extension or act from Congress, normal payments will resume on January 1. Let’s explore some ways you can prepare when payment suspension expires on December 31, 2020.

Monitor The News

First and foremost, it’s important to stay up to date on the news as the student loan crisis remains a pressing issue amidst a Presidential transition and global pandemic. President Trump originally extended Federal student loan payment suspension from September 30th to December 31st back in August. Gridlock during the lame-duck session of Congress means that it is unclear if not unlikely that another extension will be granted during the transition to a President-Elect Biden administration. Biden has proposed several new policies that could impact your student loans when he assumes office.

Plan Ahead

While you may remain optimistic that payment suspension will be extended with a new administration, it never hurts to plan ahead. Consider the following ways to start your preparation:

  • Track down your loan statements from earlier in the year (prior to payment suspension). This can give you a sense of what your payments may look like when bills are due again.
  • Contact your loan servicer directly. They may be able to provide more insight into their specific policies when payments resume. For example, if you were set up on auto-pay, your servicer may be able to inform you whether auto-pay will need to be set up again.

Keep Making Payments

Even though mandatory payments do not resume until January 1st, if you have the means there is no better time to make a dent in your student debt. During this period, every payment you make to your Federal student loan is applied 100% to the principal balance, which means your payments effectively save you double! has a suite of tools to help you crush your student debt even faster:

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Consider Alternatives

Perhaps you don’t have the means to make extra payments at this time. Moreover, perhaps you already anticipate that you will struggle to make your monthly payments when the bill arrives. You could consider the following options to lower your monthly payment or request a further extension:

  1. Reassess: Many borrowers find themselves on standard repayment plans. developed a tool called Reassess to demystify eligibility requirements for alternative repayment plans. These are income-driven programs, so your monthly payment will be commensurate with your income and family size (typically 10-20% of monthly discretionary income).
  2. Deferment: If you need to temporarily reduce or postpone your monthly payments, you could explore putting your loans into deferment status. This is generally a short-term option that you will need to qualify for.
  3. Forbearance: Another way to reduce or postpone your monthly payments is by requesting forbearance. With forbearance, interest will accrue despite payments being paused so you will end up paying more in the long run.

Final Thoughts

Only weeks remain until the current payment suspension period is set to expire. While some remain optimistic that suspension will be extended, it’s best to prepare for a scenario where payments resume come January 1st. Use the next few weeks to get organized, and take stock of whether you will be in a position to meet your payments when they resume. If not, consider some alternative options like enrolling in an income-driven repayment program to lessen the monthly payment burden.