With summer coming to an end, kids are headed back to school, but for college graduates, it also means resuming payments on their federal student loans after a hiatus of over three years.
Starting Sept. 1, interest will begin accruing, and payments will be due in October.
Brian Walsh, senior manager of financial planning for the online personal finance company SoFi, said there are steps borrowers can take to get prepared.
"Number one, it's important to take a step back and understand what federal student loans you have," Walsh advised. "You could do that by going to studentaid.gov and find information on your federal student loans, what types there are, the balances, interest rates."
Walsh emphasized it is also important for people to understand the terms of their loans, how to repay them, and what loan forgiveness options are available.
The Consumer Financial Protection Bureau warned 30 million borrowers will have a new loan servicer when payments resume. Walsh pointed out scams are more prevalent and warned borrowers to verify the legitimacy of any student loan communication.
"I haven't had federal student loans for a while, and I'm even getting phone calls and emails," Walsh observed. "One of the first places to start is by if you have a federal student loan, connect with your servicer, because over the last three and a half years, not only have payments and interest on federal student loans been paused, but there's been a ton of turnover as far as loan servicers."
Walsh explained once verified, a loan servicer can discuss repayment options to help borrowers avoid financial hardship. He highlighted the new income-driven repayment option introduced by the Biden administration, and added the plan is generous compared to previous options, and may benefit a majority of student borrowers.
