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Student loan payments resume in May. Here are 7 ways to prepare

Student borrowers. Loan repayment.
Janice Chang for NPR

A little more than three months. That's how much time is left before about 41 million federal student loan borrowers have to start making loan payments again.

The federal government froze student loan payments at the beginning of the coronavirus pandemic, and it has extended that freeze several times since, most recently right before Christmas.

The Department of Education has said payments will resume on May 1. What should borrowers be doing to prepare? Betsy Mayotte has some ideas. She's the founder of the Institute of Student Loan Advisors, a nonprofit organization that offers free counseling to borrowers. Here are her seven tips for borrowers ahead of the May 1 restart:

1. Get acquainted (or reacquainted) with your loans.

"Despite the fact that the pause has been extended, borrowers should be using this opportunity to get their ducks in order," Mayotte says.

Get answers to the following questions: How much is/are your balance(s)? What kind of loans do you have? What company is your servicer? What are your interest rates?

For federal loans, go to www.studentaid.gov to find that information.

The more you know about your loans, the better off you'll be in figuring out how to handle them. And knowing which company services your loans is extra important because some servicers have changed during the pandemic.

2. Make sure your contact info is up to date.

Make sure your loan servicers have your correct contact information: email address, mailing address and phone number. When the payment pause does end, Mayotte says, they're going to be sending you some really important information that you're going to want to see.

3. Figure out what your monthly payment will be.

Your student loan account with your servicer should list a monthly payment. If you can't access this information online, you can also call your servicer. Once you have a sense of your monthly payment, ask: Is it affordable? If not, there are a number of payment options available. (More on that below!)

4. If you can afford to, start paying before the pause ends.

The pause on student loan payments also set loan interest rates to 0%. That's a gift! That means all payments made during the pause go straight to the principal — not the interest. For borrowers who might be in a comfortable financial position, Mayotte says this is a great time to pay down as much of that debt as you can.

5. If you don't think you can afford your monthly bill, seek out additional payment options.

The federal student loan program has a few options for lowering your monthly payment. Some are based on your balance; others are based on your income.

"Thankfully there are a couple of really good tools out there to help borrowers figure out not only what their payment will be under each of those plans, but almost more importantly, how much they'll pay in the long run under each of those plans," Mayotte says.

The Loan Simulator, on the Department of Education's website, and the Student Loan Calculator, developed by the Institute of Student Loan Advisors, are two tools that can help you figure out which payment program is right for you.

If you're pursuing loan forgiveness programs, such as Public Service Loan Forgiveness, both of the calculators will also show whether these programs will actually pay off for you.

6. Be wary of scams.

As repayment approaches, Mayotte says she's starting to see more student loan-related scams on social media, over email and via calls and voicemails.

If someone reaches out to you asking for your student loan account PIN or password, that's a huge red flag. No legitimate student loan company is ever going to ask you for that. In fact, under the STOP Act, it's illegal for servicers to use personal information to access borrowers' aid records. Any entities that are allowed to access this data — a loan servicer, your university, the Department of Education — are going to have their own credentials and won't need to ask for the borrower's pin or password. But that doesn't stop the scammers from asking.

If they promise you forgiveness right out of the gate without really knowing anything about your situation, that's another big red flag.

7. Don't count on blanket loan forgiveness.

President Biden has signaled he's unlikely to use his executive power to cancel student debt, though his administration has canceled some debt through preexisting forgiveness programs. Mayotte says if you're not enrolled in an existing loan-forgiveness program, don't count on a policy of forgiveness.

"Here's the problem: Student loans are not the problem," she explains. "The problem is the cost of higher education. Forgiving student loans is like figuring out how to minimize the bleeding, rather than figuring out how to prevent the wounds in the first place."

Copyright 2022 NPR. To see more, visit https://www.npr.org.

Elissa Nadworny reports on all things college for NPR, following big stories like unprecedented enrollment declines, college affordability, the student debt crisis and workforce training. During the 2020-2021 academic year, she traveled to dozens of campuses to document what it was like to reopen during the coronavirus pandemic. Her work has won several awards including a 2020 Gracie Award for a story about student parents in college, a 2018 James Beard Award for a story about the Chinese-American population in the Mississippi Delta and a 2017 Edward R. Murrow Award for excellence in innovation.

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