Navigating Student Loan Repayments: A Guide for the Post-Grad Generation

It’s finally coming to pass. The chapter of relief – the pause on repayments and interest for the colossal $1.6 trillion federal student debt carried by 44 million Americans – is undeniably drawing to a close this time. Mark your calendars for August 31st.

Initiated as an emergency measure in the face of the Covid-19 pandemic, the repayment hiatus took root back in March 2020. It was a lifeline extended repeatedly, sometimes even at the eleventh hour, which inadvertently led some borrowers to disengage from the matter. But a pact forged between President Joe Biden and congressional Republicans has definitively sealed the fate of the moratorium. Additionally, a Supreme Court verdict quashed Biden’s proposal to forgive either $10,000 or $20,000 of debt for a majority of borrowers. This decision has far-reaching implications, affecting nearly 20 million individuals and wiping away forthcoming payments.

With the recent news of student loan repayments resuming, we wanted to take a moment to share some essential insights on what you need to know and do to effectively manage your student loans. At K Smith Company, we understand the significance of financial planning and strategy, so let’s dive into the key points you should be aware of.

**1. *Know Your Loan Details:* Familiarize yourself with the specifics of your student loans. This includes understanding the type of loan, interest rates, and repayment terms. These details will impact your payment amounts and overall repayment strategy. Since the start of the moratorium, tens of millions of borrowers have gotten a new loan servicer. You will want to take action now to make sure your contact information is up to date with the correct company. This is an easy step: Go to the Department of Education website: StudentAid.gov to review your contact info, and update as needed.

**2. *Review Your Budget:* Now is the time to revisit your budget. Assess your income, expenses, and financial goals. Allocate a portion of your budget for loan repayments, ensuring that you’re comfortably covering your obligations without compromising other financial priorities.

**3. *Consider Loan Consolidation or Refinancing:* If you have multiple loans, consolidating them into a single loan or refinancing to a lower interest rate could simplify your repayment journey. However, make sure to carefully evaluate the pros and cons before making this decision.

**4. *Explore Repayment Plans:* Federal loans typically offer various repayment plans, such as the standard repayment plan, income-driven plans, and more. Research and choose the plan that aligns with your financial situation and long-term goals. If your employment situation has changed over the last 3 1/2 years, you may no longer be in the right repayment plan, and changing could save you money.

**5. *Automate Payments:* Setting up automatic payments can help you stay consistent and avoid missing deadlines. Many lenders offer interest rate reductions as an incentive for automatic payments, which can save you money over time. If your loan has moved to a new servicer you will need to reauthorize any previous automated debiting.

**6. *Prioritize Higher Interest Loans:* If you have multiple loans, consider focusing on paying off loans with higher interest rates first. This approach can help reduce the overall interest you pay in the long run.

**7. *Save for Emergencies:* While repaying your loans is crucial, don’t forget to build an emergency fund. Life is full of unexpected twists, and having a financial safety net will provide peace of mind during uncertain times.

**8. *Take Advantage of Tax Benefits:* Certain student loan interest payments may be tax-deductible. Be sure to consult with a tax professional or utilize tax software to ensure you’re maximizing these potential benefits.

**9. *Stay Informed:* The Biden Administration has launched a string of relief initiatives for older borrowers. For example, last month, the Education Department said it would be providing $39 billion in debt relief to more than 800,00 borrowers who may have been paying for decades and could have benefitted from an IDR program. Another initiative, recently put on hold by a court, is designed to provide loan forgiveness to borrowers who were misled by their schools. If you are an employee there are also two other helpful programs available through your employer. A Covid-era tax provision allows employers to pay up to $5,250 towards your student loans each year without it counting as taxable income to you, through 2025. Beginning in 2024, employers can opt to count your student loan payments the same as they would your contribution to the company’s 401(k) plan, for the purposes of providing an employer 401(k) match The financial landscape is always evolving. Keep yourself informed about any policy changes, loan forgiveness programs, or opportunities that could impact your repayment strategy.

**10. *Seek Professional Guidance:* If you find the world of student loan repayment overwhelming, don’t hesitate to seek guidance from financial advisors or professionals. We can help tailor a plan that aligns with your unique circumstances and goals.

Remember, navigating student loan repayments is just one aspect of your financial journey. While it may seem daunting, taking proactive steps now will set you on the path to financial freedom and success. At K Smith Company, we’re here to support you every step of the way. Feel free to reach out if you have questions or need personalized advice.

Let’s face these challenges head-on and build a secure and prosperous future together.