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Student Loan Borrowers Could Be in Trouble When Payments Resume. What You Can Do to Prepare

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When the payment pause on federal student loans ends on Jan. 31, 75% of borrowers say their finances will take a hit.

That's the finding from a new survey from Bankrate and BestColleges, which polled more than 4,700 adults in November.

More than 40% of borrowers expect that having to pay their bills again will reduce their ability to save. A quarter are worried about how they'll cover their rent or housing costs come February. The average monthly student loan payment is around $400.

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"College students often face one of the most stressful Catch-22s of personal finance: Higher education increases their lifetime earnings potential, but both affording it and paying it off can be a strain on their finances and mental health," said analyst Sarah Foster.

Still, there are steps borrowers can take before the payments are turned back on if they're worried. Here's what you need to know.

When will bills be due again?

In February. Your exact due date will vary depending on the time of month you began paying your student loans.

Even though the payment pause has been repeatedly prolonged over the coronavirus pandemic, don't count on getting more time again, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit. The U.S. Department of Education said the last extension was the final one.

"It's best to prepare now," Mayotte said.

How can I prep?

Over the next two months, borrowers should make sure that their student loan servicer has their current contact information, said Mark Kantrowitz, a higher education expert. If you've moved, for example, it may not.

If you were enrolled in automatic payments and your banking information has changed, you'll also want to notify your servicer of that.

Putting aside some money for when payments begin again may also make the transition less painful, experts say.

Millions of borrowers will find they have a new lender when the bills resume.

That's because three companies that serviced federal student loans — Navient, the Pennsylvania Higher Education Assistance Agency (also known as FedLoan) and Granite State — all recently announced that they'd be ending their relationship with the government by 2022.

Impacted borrowers should get multiple notices about the change, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

Come February, if you mistakenly send a payment to your old servicer, the money should be forwarded to your new one, he said.

What if I won't be able to make the payments?

If you're still unemployed or dealing with another financial hardship because of the pandemic, you'll have options.

First, put in a request for the economic hardship or the unemployment deferment, experts say. Those are the ideal ways to postpone your payments because interest doesn't accrue under them.

If you don't qualify for either, you can use a forbearance to continue suspending your bills. But keep in mind that interest will rack up and your balance will be larger (sometimes much larger) when you resume paying.

If you expect your struggles to last a while, it may make sense to enroll in an income-driven repayment plan. These programs aim to make borrowers' payments more affordable by capping their monthly bills at a percentage of their discretionary income and forgiving any of their remaining debt after 20 or 25 years.

How do I decide on the right payment plan?

Many people's lives have been changed by the pandemic.

If your circumstances look different than they did more than a year ago, it may make sense to review the payment plans available to you and find one that's the best fit for your current situation.

In the meantime, the law has also changed.

Student loan forgiveness is now tax-free until at least 2025, thanks to a provision included in the $1.9 trillion federal coronavirus stimulus package that President Joe Biden signed into law in March. The policy will likely become permanent, experts say.

That may make income-driven repayment plans more appealing, since they often come with lower monthly payments and borrowers will likely no longer be hit with a massive tax bill at the end of their 20 or 25 years of payments.

But if you can afford it, the standard repayment plan is just 10 years.

To determine how much your monthly bill would be under different plans, use one of the calculators at or, Mayotte said.

If you do decide to change your repayment plan, Mayotte recommends submitting that application to your servicer as soon as you can. Lenders will likely be overwhelmed when they have to begin collecting loan payments from tens of millions of people again.

"I have significant concerns that there will be some big servicing delays," Mayotte said.

Is student loan forgiveness still possible?


President Biden has asked the Education Department and the Department of Justice to review his legal authority to forgive student debt through executive action. The fact that those reports are still pending may explain why we haven't heard anything more definitive yet, experts say.

"He's not going to take any steps until that report comes back," Kantrowitz said.

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