Student loan payments will resume on February 1, 2022, and 89% of working borrowers aren't ready, survey finds

"Even amid a newly stressful financial challenge, we want to try to protect our long-term financial outlook."


After nearly two years, the pandemic-inspired federal student loan pause is set to expire on January 31, 2022. Many borrowers aren't ready to start paying again, though.

Though more people have been getting back to work, 89% of full-time employed adults with student loans say they aren't financially secure enough for forbearance to end, according to new data from the Student Debt Crisis Center. And 1 in 5 don't think they will ever be equipped to resume.

While there's plenty of support to extend the reprieve, it doesn't appear likely that will happen, and those with student loan debt will have to begin payments again in February. To add to the stress, many of those borrowers will have to do so with a brand-new loan servicer.

Navient, FedLoan, and Granite State each announced this year that they will no longer work to collect federal student debt payments. That means roughly about 16 million borrowers will be switched to another company, according to higher education expert Mark Kantrowitz. Keep an eye out for communications from your loan provider for new details on how the transition could affect you, he says.

How to prepare for repayments to begin again

If this all feels like too much, Kantrowitz says, the best thing you can do is prepare. The "first thing you should do is log in to your current servicer's website and make sure your contact information is up to date." If not, "you're not going to get those notices about the transition."

While online, "print or save a copy of your payment history," he adds. "That way, you'll have a record that shows what loans you had, what their balances were, and all your payments."

Borrowers can get more organized by making a spreadsheet with key information about each loan, including total balances, interest rates, and due dates, experts suggest. Then start setting aside part of your income and figure out how this new budget might affect your finances.

Even if you've been able to keep up loan or interest payments during the break, now could still be a good time to create a repayment plan or revisit one you already had, Kantrowitz adds.

What you can do if you aren't financially ready to repay

There are more than 42 million U.S. student-loan borrowers who owe a total of $1.7 trillion, according to the latest Federal Reserve data, so you're not alone if you're struggling. The average 25-to 34-year-old borrower owes $33,817, while the average 35-to-49-year-old owes $42,373.

Of the more than 33,700 respondents in the national SDCC survey, over a quarter, 27%, say one-third of their income or more will go toward student debt when payments start back up. Meanwhile, 1 in 10 think half their income will be spent on loans instead of other important bills.

"Contact a loan servicer" if you're nervous you can't afford another bill, says Kantrowitz, "and ask them about your options. Not talking to them isn't going to make the problem go away." You can request an income-driven repayment plan, which could lower monthly payments based on your discretionary income, "defined as the amount by which your adjusted gross income exceeds 150% of the poverty line," he explains.

If you were already on an income-based plan before the pandemic hit, some servicers are extending the deadline to recertify that plan until 2023, which could protect borrowers who had manageable payments based on their income from having to now pay a much higher monthly rate.

When payments restart next year, you could pay the same amount you were in 2019. People who've lost a job or seen a wage cut can still ask for recertification to lower or suspend payments. Keep in mind interest may continue to accrue during the time off, meaning "your loan balance may potentially get bigger and bigger and bigger," he notes. "So you're digging yourself into a deeper hole."

Contact your loan servicer and ask them about your options. Not talking to them isn't going to make the problem go away.
Mark Kantrowitz
student loan expert

Another choice is to apply for an unemployment deferment, which can pause payments for up to 36 months but requires you to reapply every six months and show proof you're out of work.

Deferment isn't necessarily the best long-term choice, experts warn, since compound interest will still accumulate as you put off payments, meaning a bigger overall bill. Reconsider alternatives before you defer, "such as cutting back even further on expenses, or asking a family member for help," Kevin Mahoney, CFP, founder of Illumint in Washington, D.C., previously told Grow.

"These choices never feel good," he said, "but even amid a newly stressful financial challenge, we want to try to protect our long-term financial outlook."

Student loan forgiveness is not totally off the table. President Joe Biden recently asked the U.S. Department of Justice and the U.S. Department of Education to review his legal authority to forgive student debt through an executive order. And pressure for more reprieve has been mounting among some lawmakers: Senator Elizabeth Warren, D-MA, and Senate Majority Leader Chuck Schumer, D-NY, sent a letter to the president asking to postpone payments until at least March 2022, arguing in part that loan servicers are also unprepared for repayments.

Other organizations like the American Civil Liberties Union have voiced support for an extension. Until that's a reality, however, says Kantrowitz, it's smart to focus on the actions you can take.

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