How to Prepare for the End of the Student Loan Pause

Editor’s Note: This article was originally published in October 2021. It has been updated as of April 17, 2022 to reflect the fact that President Joe Biden has extended the pause on federal student loan repayments again, now through August 31, 2022.

Student loan pause—what’s happened so far

During the pandemic, the Department of Education announced a student loan pause in order to provide emergency relief for student loan borrowers. The pause was signed into law under the C.A.R.E.S. act of March 2020 and included the following relief measures for eligible loans:

• a suspension of loan payments
• a 0% interest rate
• stopped collections on defaulted loans

If your loans were eligible, your loan payments were automatically paused and your interest rate was set to 0%.

If you make loan payments during the student loan pause while interest is 0%, the full amount of your payments will be applied to your principal balance once you have paid all the interest that accrued prior to March 13, 2020, and any fees (for defaulted loans).

Originally intended to expire in September 2021, the student loan pause has been extended through August 31, 2022. With the deadline in less than six months, here are some steps you should take to prepare to make your student loan payments again.

Prepare for the end of the student loan pause

Find the right repayment plan for you

Your situation may have changed during the pandemic. The student loan pause is a great time to think about whether you’re on the right payment plan for your situation. Use Loan Simulator, which can help you calculate student loan payments under different plans, and find a loan repayment option that best meets your current needs and goals. You can also use it to decide whether to consolidate your student loans.

Refresh your contact info

For many, the pandemic has been a period of upheaval involving moves, job transitions, unemployment, and more. Make sure your information is up to date in your profile on your loan servicer’s website and in your StudentAid.gov profile. Incorrect information could cause you to miss important updates, bills, or crucial changes in your payment plan.

For those on Income-Driven Repayment Plans, changes in your income—if and when updated on your profile—could yield a new, lower payment amount. Make sure to update your profile by following these steps and find out if your student loan payments will be changing.

Set up auto-pay

Auto-debit payments were automatically suspended when the COVID-19 emergency relief period began. Most loan servicers will be reaching out about how to manage your auto-pay before payments begin again, but it’s still good practice to get ahead. You should check the auto-pay details you have on file, turn auto-pay on if you want to, and verify your financial details are correct (making sure that money will flow out of the correct accounts).

If you want to resume auto-pay now (before the end of the student loan pause), contact your loan servicer to tell them you want to opt out of the pause. If you do not want to enable auto-pay just yet, you can still make manual payments. Visit your loan servicer’s website to make a payment or contact your loan servicer for more information. Please note, even if you opt out of the student loan pause or make payments while it is in effect, 0% interest will be applied to your loans until May 1, 2022.

Practice making your student loan payments again

For some, it’s possible the “extra” income usually allocated for student loan payments could have led to lifestyle creep during the pandemic. With the end of the student loan pause coming up, now is the time to make sure you’re prepared to make those payments again.

Start by evaluating your budget, talking to your partner about all the options available to you, and figuring out your payment amount, as above.

Then practice by building that amount into your budget now. Not only will you get back into the habit of having a budget that accounts for your student loan payments, but you’ll also get ahead of your payments by saving in advance.

You could also practice saving for your student loan payments by building the amount into your budget now, but actually put those dollars towards other financial goals you have currently, like saving or investing those “extra” funds.

Make sure any extra payments you make go to your principal

Please note: This step is important at all times, and a good reminder as people prepare to make student loan payments again.

Make sure any extra payments you make, now during the student loan pause, or once the pause is over, go to your principal. You must contact your loan servicer in order to make sure this happens, otherwise extra payments will automatically be marked as “early payments,” essentially sitting in limbo until the next bill is due, at which point, the payments are allocated.

What’s the difference you ask?

When you make an “early payment,” you are simply continuing to make your regular payments towards the same principal with the same amount of interest owed, just on a slightly different schedule. It could be really helpful to have a payment sitting in limbo ready to go, if you ever find yourself unable to make a payment at some point, but there are even bigger benefits in making sure extra payments go directly towards your principal.

When extra payments do go towards the principal, it actually decreases the total amount you owe, because as you pay off the principal, the amount of interest owed decreases. If your principal owed is paid off more quickly than anticipated (i.e., if you’re paying off more than the minimum each month), then the total interest owed will decrease, meaning you’re paying less money overall in the long run. Extra payments are an amazing way to save money over time.