HARRISBURG, Pa. (WHTM) — Payments for federal student loans will resume in less than two months after the Biden administration said it won’t extend the pause that’s been in place since March 2020.
Not having to make payments during the pandemic has helped a lot of young adults and families stay afloat, but with inflation still high, many are having to make changes in their budgets.
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Since March 2020, the U.S. Department of Education has suspended payments on federal student loans with 0% interest and stopped collections on defaulted loans.
“That’s just more money that we were able to put back into the house more money to be able to put back into the kid and to the economy,” said Megan Vaughn-McClary. “We also have a daughter that’s currently in college so that you know, freed up some money to put her in school as well.”
Megan Vaughn-McClary’s payments were $300 a month, and with payments set to resume on February 1, she’s starting to plan.
“We’re spending a lot more on gas, a lot more groceries. Everything is a little bit more expensive than normal,” Vaughn-McClary said. “And our student payments are a pretty big chunk of our monthly budgets.”
Lisa Kennedy, a content analyst with PSECU, knows how beneficial the pause has been for people.
“It’s been a really helpful thing to have folks not have to make these payments each month,” Kennedy said. “They’re able to allocate those funds to other debt payments or other bills that they may not have been able to while they were making their loan payments.”
For direct care worker Catherin Detwiler, finances are tight and it won’t be easy making those loan payments again.
“I’m going to have to take from a bill and try to play with my paychecks or do without. You know I’ve already started cutting costs back,” Detwiler said.
Kennedy suggests trying to cut your cell phone bill or shopping around for a better rate on auto insurance.
And if you’re worried about payments starting up again, “Don’t be afraid to ask for help. Really being proactive in these circumstances is so helpful for you. You know, it gives the lender the opportunity to put you into different payment plans, adjust those monthly payments, and it avoids negative impact on your credit,” Kennedy said.
For many borrowers, interest rates will be the same as they were before the pause, but some may have changed.
You’re urged to log into your account to make sure your payment methods are up to date.
For more information about preparing for loan payments to begin again click here.