Federal student loans are now at 0% interest rates, and payments have stopped since March 13, 2020. Many student loan borrowers have found relief from the COVID-19 financial crisis by this interest-free forgiveness. This is the "student loans pause", as we like to call it.

However, the student loan reprieve will expire on January 31, 2022. It would be rare for it to be extended again.

It's obvious that after such a long break, no one is thrilled about the prospect of having to budget again for student loans. It's important to plan. These are the steps you should take to be prepared for that dreaded moment.

The world is far from normal. However, the Department of Education will be ending the coronavirus forgiveness period on January 31, 2022. This means that federal student loans payments will start as soon as February 1, 2022.
The Department of Education has canceled all auto-debits that were previously set up for student loans. You will need to reset all your accounts and information so that the payment is automatically debited. For more information, consult your loan servicer.

What happens when student loans are unpaid?

When student loans are unrestricted, two big things will occur. The first is that the interest rate on student loans will rise back to its pre-Covid level. The interest rate currently stands at 0%. The rate will return to the original loan rate on February 1, 2022.

Second, borrowers will have to make monthly payments towards their federal student loans. These payments were halted on March 13, 2020.

NoteMany analysts are concerned that some borrowers could default if student loans go into default. You should check the status of Federal loans and the due payments. Don't let it default!

What will the impact of student loan forgiveness be?

For Public Service Loan Forgiveness (PSLF), and Income Driven Repayments (IDR) forgiveness, $0 payments made during coronavirus forbearance periods are counted.

You can request a refund right away if you paid during the forbearance. All payments between March 13, 2020 and January 31, 2022 are eligible for a full refund.

Do not delay in requesting a refund. This should be taken care of immediately.

Tips to Prepare for Student Loan Payments

It can be scary to think about having to squeeze a large student loan payment into a budget already stretched. But don't stress. We have 5 tips that will make your transition smooth.

Plan Your Budget

Your checking account could be shocked to learn that you have not paid for eight to nine months. Your new payment will not be the same as the February 2020 payment unless you have an Income-Driven Repayment plan (IDR).

Check your loan servicer’s website between now and the end to verify your payment. Next, add the new payment to your budget.

Change your contact information with your loan servicer

Anybody who has changed their email address or phone number should inform their loan servicer. Your loan servicer can help you with any problems that might arise.

This is why it's so easy to set up your online account. You can access your loan status, information and make payments.

You don't have to be concerned about your loan servicer moving (e.g. Fedloan, GSMR) because it's unlikely that this will happen until a later time. If these are your current servicers you should contact them.

Related The Complete List of Federal Loan Servicers (with Contact Info)

You can read mail from your loan servicer

You may receive important information from your loan servicers about the status of your loan and what to do if student loans are canceled. You should not accidentally delete any communication from your servicer. Take the time to read and respond as necessary.

You can also view all information online if your loan portal is online.

Re-Start Direct Debit

All auto-debit settings that were previously set up were deleted in order to verify all information. All borrowers need to log in to their loan servicer's site to re-setup direct debit settings.

While this may be frustrating for some borrowers it is a good idea to make sure student loan payments are taken from the right account.

If AutoPay is necessary, turn off

You should turn off automatic transfers from your 401(k), IRA, or other accounts that you have set up to take advantage of the savings. Once payments resume, you don't want your account to become inexplicably overdrawn.

You might consider enrolling in an Income-Driven Repayment Plan (IDR).

People who have lost their income in the first nine months due to the pandemic might find that the current payment does not fit into the new budget. You might consider enrolling in an Income-Driven Repayment plan (IDR) before the end of the year.

You will not be able to restart your loan payments by enrolling in an IDR program. It is important that you enroll in an IDR plan before your first payment. Visit StudentAid.gov/idr to enroll in the IDR plan you choose. To start your application, click on "Apply Now".

Re-Certify IDR Plans

In order to verify that your IDR payment is correct, you will need to certify the income if you were on an income-driven repayment program. The Department of Education allows you to "self-certify", your income, for repayment re-start. This will ensure that your IDR payment is accurate.

StudentAid.gov allows you to self-certify your income.

How to Make Payments

You will need to make student loan payments again starting in February 2022. Auto-debit program participants will see their payment automatically drafted from their bank accounts. Auto-debits will not be automatically restarted by loan servicers. You need to log in and update your information.

Borrowers who have made manual payments should start sending checks and making transfers via the loan servicers' website. Contact your loan servicer for more information on making manual payments.

Recertifying Income During Student Loans Unpause

You will eventually have to recertify your income if you are on an IDR plan. The income re-certification date has been moved to 2022. Information about your recertification date should be sent to you by your loan servicer.

Self-certification of income is possible for this year only. Go to StudentAid.gov to do this.

Do I have to pay off my loans in a lump sum?

Many people have struggled in recent months. However, some have been able to increase their income and savings. You may be able to pay off your loan if you have the funds. To get started in 2022, you can make a payment to repay the entire amount of the loan.

It may be prudent to delay making additional payments if you don't have the money to pay your loans off in one lump sum. It is risky to use your savings to pay off debt with a manageable interest rate, as the economy is still in shambles. Before making large extra payments, wait until you are able to pay off your debt.

Thoughts about Forgiveness:If there's any chance of loan forgiveness, it might be a good idea to wait until Biden is in office before you pay off your loans. It's a good idea to wait, even if it means paying a little more interest.

Last Thoughts

The unfreezing student loan payments should not cause you any problems as long as you have updated your banking and contact information with your servicer.

IDR plans are a great option if you have lost income or had financial difficulties in the past few months. They can help keep your monthly payments affordable. If your financial situation is stable, you might want to look into student loan refinancing lenders in order to find a lower interest rate.

Refinancing federal loans was almost pointless during the 0% interest rate period. It could be worth looking at if payments resume.

No matter what your personal circumstances, it is important to plan your future so you are ready for student loan repayments tomorrow.