As of Sept. 1, 2023, interest on federal student loans is accruing again after being waived, along with loan repayments, since the March 2020 onset of the COVID-19 pandemic. Now, individuals with federal student loans must begin planning to start repaying these debts for the first time in more than three years. With this in mind, and with October being National Financial Planning Month, it’s the perfect time to study up on some smart money management tips.
The resumption of student loan repayments is likely to be a burden for many, but the reality is there’s time to plan accordingly. The administration is providing an “on-ramp period” from now until Sept. 30, 2024, which is essentially a grace period, as missed payments until then won’t result in individuals being reported as being in default. However, interest will accrue on student loan balances. In other words, it’s best to begin repayments promptly while reevaluating long-term financial plans. Consider these tips that may help:
- Put payments—and savings—on auto. Electing to have portions of the direct deposit of your paycheck automatically diverted toward loan repayments and savings is a great budgeting practice that’ll help you repay your loans on time while also setting aside money without having to think about it.
- Redirect discretionary spending. Cutting back on unnecessary spending is a great way to dampen the hit of student loan repayments—and it’ll afford you more savings, strengthening your financial future in the long run.
- Apply for an income-driven repayment plan. Federal Student Aid’s income-driven repayment plans set your monthly student loan payment at an amount that’s intended to be affordable based on your income and family size. Individuals who qualify may be able to lower their monthly payments or earn loan forgiveness after a certain number of qualifying payments.
It’s not easy to forecast what your financial future might look like or what your needs will be. However, a CPA—a certified public accountant—can help guide you through formulating a long-term financial plan. The Illinois CPA Society’s free “Find a CPA” directory can help you find the trusted, strategic advisor that’s right for you and your family based on location, types of services needed, and languages spoken. Find your CPA at www.icpas.org/findacpa.