After an unprecedented pause since March 2020, the federal student loan interest rates have started to kick back in. This marks a significant shift for many borrowers, as their education debt will now return to its pre-pandemic rates, which typically ranged between 3% and 7%.
The Break is Over
The suspension of interest and payment penalties was a welcomed financial respite for millions. With this policy, virtually all eligible borrowers paused their monthly bills. According to an analysis by a higher education expert, less than 1% of qualifying borrowers continued to make payments during this period. The average borrower saved approximately $15,000 in total payments, including around $5,000 in interest.
Brace for Payments
Your initial loan repayment after the suspension is set for October. You're likely not the only one if you need more certainty about adjusting these payments to your monthly expenses. Many borrowers are currently trying to determine how to incorporate student loan repayments into their financial strategies. With the average monthly student loan payment of about $350, making suitable plans is essential.
Check Your Rate
To determine what interest rate you'll be dealing with, visit Studentaid.gov or contact your loan servicer.
Exceptions to the Rule
It's important to note that some borrowers may still be eligible for interest deferment. This includes those with unsubsidized undergraduate loans currently enrolled in school or a grace period. Additionally, if you're facing unemployment or another form of economic hardship, you might qualify for deferment options that could keep your interest from accruing.
As we navigate this transition, staying informed and taking proactive steps to manage your debt responsibly is crucial. Some planning can go a long way, whether budgeting or exploring deferment options.
If you're overwhelmed by the prospect of resuming payments, remember you're not alone. Our team at IM Wealth Partners is available to help you understand your options and make the best financial decisions.