How to prepare for when student loan payments resume

Having a plan for resuming student loan payments can help you avoid financial headaches. (iStock)

The federal CARES Act offered financial protections for people struggling amid the COVID-19 pandemic. A key benefit included in the act and recently extended was a temporary forbearance for federal student loans lasting through Jan. 31, 2020.

If you're one of the millions of borrowers who owe federal student loans, it's important to be prepared for when student loan repayments resume in February.

How to prepare for student loan payments in February 2021

Here's what you can do between now and then to get ready.

  1. Continue paying your student loans
  2. Look into student loan refinancing
  3. Talk to your student loan lenders or loan servicers
  4. Explore other options

1. Continue paying your student loans

The CARES Act reduced interest rates on eligible federal loans to 0%. Since interest isn't accruing, you don't have to worry about having a higher balance to pay off in February. You can take advantage of the 0% interest window now by continuing to make payments toward your loans. Every dollar you pay can chip away at your balance.

If you can't pay anything, dig into your budget to see how affordable payments will be once February rolls around.

"Students should be taking an honest look at their finances," said Josh Simpson, a financial advisor with Lake Advisory Group in Lady Lake, Fla. That means knowing how much you're spending and what you can realistically afford to pay toward your loans.

If you have private student loans and you're looking for student loan payment relief, visit Credible. You can get prequalified student loan refinancing rates from up to 10 lenders to find out if this approach could save you money. (If you have federal student loans, you could lose federal benefits, so consider this option carefully).


2. Look into student loan refinancing 

Student loan refinancing is something to consider if you're interested in:

  • Reducing interest rates on student loans
  • Switching from fixed interest rates to variable interest rates or vice versa
  • Lowering student loan payments

Thanks to the Federal Reserve, interest rates are near historic lows.

If you already have private student loans, refinancing them could make sense if you could save money on interest or make your monthly payments more affordable. When considering whether to refinance student loans, research options carefully. Use an online tool like Credible to compare fixed interest rates and variable interest rates for private student loans.


But if you have federal student loans, consider the trade-offs of refinancing first. Since refinancing means replacing your existing loans with private student loans, you'd lose certain protections afforded to federal loan borrowers. This includes CARES Act benefits such as student loan forbearance and the option to enroll in an income-driven repayment plan.

Simpson said if you're on the fence about refinancing or which lender to choose, you should ask lots of questions.

"You want to get as much clarification as possible on what the terms of the new loan would be," Simpson explained.

Since interest rates are very low right now, you have a good chance of refinancing your private student loan at a lower rate than what you're currently paying. See how much you could save today by refinancing. You can also use an online student loan refinancing calculator to estimate what your monthly payments might be.

3. Talk to your student loan lenders or loan servicers

If you're concerned about being able to afford your student loan payments once they begin again in February, it's important to stay in touch with your lenders.

"The best thing you can do is to start speaking with your loan servicer now," Simpson said. "The earlier you start the process, the more likely the lender is to work with you because they'll appreciate that you didn't wait until the last minute."

Private student loans aren't covered by the CARES Act, but your lender may still be able to help if you're struggling financially. For example, they may offer temporary forbearance or allow you to make interest-only payments toward your loans for a set time period.

Refinancing is also an option. Private student loan lenders will consider your credit history and credit score, so if you're new to using credit, you may need a cosigner to get approved at the best rates. Consider visiting Credible to compare student loan refinance rates from multiple lenders without affecting your credit score.

4. Explore other options

If you have federal loans, the end of CARES Act relief means you'll no longer be eligible for its student loan forbearance benefit. The interest rates on your loans will also revert to whatever they were prior to the act.

But that doesn't mean you're entirely out of options for making your loans more manageable. While refinancing is a possibility, you might also consider taking advantage of federal loan benefits, such as:

  • Enrolling in an income-driven repayment plan: The less you make, the less you're asked to pay, Simpson pointed out. Income-driven repayment is required if you're interested in student loan forgiveness.
  • Student loan forbearance or deferment: You may be eligible for student loan forbearance or deferment outside the period allowed by the CARES Act. The Department of Education allows for general and mandatory forbearance periods, as well as deferments of eligible student loan repayments.

Either one could allow you to temporarily pause payments. Keep in mind that interest may continue to accrue on your loans.