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Student Loan Repayments: How to Prepare

In this quick-hit bonus episode, Tori is walking you through what’s happening when student loan payments restart in September, how to be prepared, and how to learn more about your options for repayment.

More resources:

Student Loan Repayment Options Calculator

Biden-Harris Student Loan Forgiveness

SAVE Plan

Episode: The Sneaky Ways Companies Keep You in Debt

Important Student Loan Repayment Dates

Financial Aid Information

How  to Get Student Loan Help

Student Loan and Repayment Resources

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Transcript:

Tori Dunlap:

Hello Financial Feminist. Welcome to the special edition. I’m trying to be positive and exciting because we’re talking about a not so exciting topic today, which is student loans are starting up again. We’re just going to do a really quick and dirty episode. You know me. I’m Tori. I am a money expert. I am a New York Times bestselling author, and also today, someone who is going to soothe you about your student loans. Before I even get started, I want to be super-duper clear. We are so supportive of student loan forgiveness. It’s not even funny. Talk about this in my book. This is where the part of financial feminism has to come in, where it’s like, yeah, 20% is personal choices. 80% is the systemic bullshit of it all. However, as much as we want to support and vote for politicians who support student loan forgiveness, we’re also dealing with fucking Mitch McConnell, who knows for how much longer, but we are dealing with Mitch McConnell. And we are dealing with people who don’t believe in student loan forgiveness.

So right off the bat, right out of the gate, do we support it? Hell yeah. Do we vote for it? Hell fucking yeah. Do we rely on it as our end all be all plan? Unfortunately not. And again, I say this in my book, I wish that I could trust that the politicians who are supposed to be working for me are going to actually help me, and help the people that I love, and help our community. However, that’s rarely often the case. So please don’t use the student loan forgiveness thing as this pipe dream of like, “Oh, I just won’t fucking worry about it because it’ll happen.” Who knows at this point? So yes, do we continue to support it? Hell yes. Do we continue to advocate for less predatory financial practices? Hell yeah. Do we also not rely on it as our strategy? Also, hell yeah.

So let’s break down what’s happening right now to give you some information that you need, whether you have private or public student loans. And if you also don’t know which ones you have, stay tuned. Okay, so starting September 1st, we’re recording this August of 2023, so this is the current most up-to-date information. Starting September 1st, interest on your federal student loans will begin accruing. For those who either don’t know, missed it, for federal loans, your interest has currently been on pause and been on pause for almost three years, I think more than three years. It’s been since the beginning of the COVID-19 pandemic as a way for you to basically cut some slack because life’s really hard right now. But September 1st, your interest is going to start accruing. A quick reminder how debt works. Again, more episodes about this, but your debt is your principal plus your interest.

Your principal is your original amount of money you took out, right? So if you took out $30,000 of student loans, that’s your principal. Your interest is the price of that loan, right? So they’re saying, “Hey, I’ll give you $30,000, but I’m going to charge you interest on top of that.” So what’s happened up until now is that your interest has been paused. The thing that’s happening in addition is that yes, the interest will begin accruing September 1st, but you actually have until October until you have to pay. So the interest starts accruing September 1st, but the debt repayments start in October. So even though your interest is starting to accrue again, you have another month to get your shit together. I keep seeing this September 1st D-Day deadline. That is when the interest starts accruing again, right? The interest was on pause. Now it’s going to start accruing again, and you have until October until you actually have to start repaying.

Your loan provider should notify you of the exact dates. So if you do have further questions, you’re wondering about your loans in particular, reach out to your own loan provider. Now, we need to understand what kind of loans we might have, private versus public, private versus federal. We are talking about federal loans right now, meaning through the government, right? These are public loans. These are the better types of loans. I’m going to be very clear. There’s a really good type of student loan, which is the federal slash public loans, and a less good version of student loans, which are private loans. Private loans, most likely you have not had an interest pause. If you’re confused as to what type of loan you have, ask. Ask your loan provider. But the difference is in who’s providing the loans, and the terms of those loans? So if you do have private loans through a private institution, you might be able to negotiate your interest rate, or negotiate your loan repayment.

How do you do this? There’s a script in my book to teach you how, but TLDR, you call them, and you’re like, “Hi, here’s my problem. I am still being affected by COVID-19. I’m going through a financial hardship. I just got laid off,” blabbity, blah, whatever that looks like for you, “And I would love to discuss some sort of decrease in interest, or if there’s anything you can do for me.” They might decrease the interest rate. They might be able to put you on a reduced payment plan. There’s various things that they can do for you, but you don’t know if you don’t ask. So again, public slash federal loans, the interest is starting to accrue again on September 1st, but you don’t have to start repaying them till October. Your loan provider should notify you on the exact dates. Some private loans have already started back up.

You’re going to need to check in with your loan provider if you have not heard anything about payments restarting. The big thing I want to highlight while we have a little bit of time before this starts again, if you can make a sizable payment to your student loans, and maybe actually pay them off without wrecking your other financial goals, without taking money out of your emergency fund, without going into credit card debt, without delaying your own retirement for years, if there are ways that you can send a bunch of money right now to your student loans, this is the opportune time, again, especially if you have federal loans because the interest isn’t accruing. As a reminder, the principal’s the original amount of money that you took out, and if you can lower your principal, that means less i
nterest in the long run. So any additional money that you can send in, and make sure it’s going to just the principal. If you don’t know how to do that call and ask. That is a great way to either completely eliminate your student loans, you’re not going to have to worry about them, or to decrease the amount of money you’re going to pay overall because there’s less interest charged on less principal.

Now, there’s different various repayment options for federal loans. You have a standard payment plan, which is exactly what it sounds like. You have an income driven repayment plan, which is based on how much income you might or may not be making, and one of the final versions of federal loans is a graduated plan, which increases your payment over time, right? It’s this idea that when you’re first graduating college, you might not be making as much money, so they’re cutting you a little bit of slack, but then increasing it I believe every two years. There are various pros and cons of each of these repayment plan options, but it’s important to consider factors like monthly payments, right?

How much is the payment per month versus the length of the loan? When I took out a car loan, I opted for a higher monthly payment because I could afford it, because that means it shortened the total duration of the loan, which means it costs less money. But you might not be able to do that because you might not be able to afford a higher monthly payment, right? You also need to think about the total amount of interest that you’re paying. Again, the interest is the cost of that loan. It’s everything that you’re having to pay for on top of the original amount of money. So that’s really important to consider is what is the interest rate as well as the total interest paid. And also, yes, while we hopefully are supporting and advocating for student loan forgiveness, we also want to think about what is the potential of these loans being forgiven?

Big highlight thing right here, if you have federal loans, do not turn them into private loans. I want to say that again. Do not turn federal loans into private loans unless it’s an act of God. Once you do that, you are no longer eligible for any potential student loan forgiveness. If your student loans are federal slash public student loans, you’re probably not going to want to turn them into private loans, so just keep that in mind. How do we actually pay off our student debt? We have previous episodes about how to pay off debt. The entirety of chapter four of my book is How to Pay Off Debt, but like I said before, the best way to pay off debt is contribute extra money in addition to your monthly payment to the principal. Again, principal is the original amount of money you took out.

If you can lower that amount of money, you’re going to end up saving money in the long haul because you’re not paying as much interest. It helps you eliminate your debt faster. If you have private loans, again, try to negotiate them. We also have partners that help you lower your student debt interest rate for private loans. If you go to herfirst100k.com/tools, we’ll also link that in the show notes. And as always, support and advocate for student loan forgiveness. Finally, I know that debt feels awful. I know that debt feels scary, and frustrating, and just like, “What’s the fucking point?” I want you to know that if you took out student loans to go to college, you have something to show for it. You have a college degree. You worked hard for that degree. You have it. It is yours. It is not a waste of money.

It is not a waste of time. It was not a stupid decision. I want to highlight that you are doing the best you can, and that we are in a fucked up system with a trillion dollar student debt crisis. I just want to encourage you that if you have student loans, you are not alone by any means. And we are here to support you, here to teach you how loans work, here to teach you how to navigate them to the best of your ability, and also we’re here to support you through all of this that’s about to come, whether that is forgiveness or not, whether that is hopefully payments not restarting, but it looks like they are. We are here to support you through all of that. If you are on Spotify, drop your questions about student debt down below in that little audience participation box, and you can leave us voicemails.

You can leave us voicemails about any kind of debt, but especially student debt. We would love to hear from you, get your questions. And also if you have a great student loan debt win, I know that the rest of this community would really, really value hearing it. So if you’re willing to share, I would love to hear your voicemail. This is a quick down and dirty update for you as we transition back into payments.

Again, quick highlight. One, understand the difference between private loans and public loans or federal loans. Two, if you do have federal loans, interest will probably begin accruing on those balances on September 1st, followed by the first debt repayments in October. You have various repayment options for federal loans, and there’s pros and cons to each one. If you have private loans, negotiate. Call and see if there’s anything that they can do. And finally, to start paying off your debt quicker, put extra money if you can towards the principal. The principal is the original amount of money you took out. We are cheering you on. We are so thankful you’re part of this community. We can all agree that student loans fucking suck, and we’ll see you back here next week.

Thank you for listening to Financial Feminist a Her First $100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, marketing and administration by Karina Patel, Sophia Cohen, Kahlil Dumas, Elizabeth McCumber, Beth Bowen, Amanda Laphew, [inaudible], Caitlin Sprinkle, Samaya Mula Carillo, and Harvey Carlson. Research by Arielle Johnson, audio engineering by Austin Fields. Promotional graphics by Mary Stratton, photography by Sarah Wolfe, and theme music by Jonah Cohen Sound. A huge thanks to the entire Her First $100K team and community for supporting the show. For more information about Financial Feminist, Her First $100K, our guests and episode show notes, visit financialfeministpodcast.com.