The sweet relief of collection forbearance is swiftly coming to an end for the 40 million federal student loan borrowers. Since the beginning of the pandemic, holders of federal student debt have enjoyed a freeze on collection as well as a 0% interest rate. Those benefits will be halted, and collections and interest accrual will resume as normal starting February 1, 2022. This change may come as a shock for borrowers who have become accustomed to having that little extra wiggle room in their budgets. The situation has caused stress for many loan holders, but there are things you can do to mitigate any potential financial damage.

The most important thing borrowers can do to stay ahead of the curve is to make sure their account information is up to date. The last 22 months have come with a lot of changes and your life circumstances may be significantly different than they were when you last made a student loan payment. Make sure your mailing address is current on your account profile and that there is a reliable way for your loan servicer to contact you should they need to send any updates or notices. Find out if you are set up for automatic payments and make any necessary changes to your billing method preferences. If you were previously enrolled in an automatic payment system, you shouldn't have to reenroll or take any further action as those systems are set to resume as normal. However, it is important to confirm this enrollment to prevent avoidable late payments.  

It is possible that the company servicing your loans may not even be the same company as in the pre-pandemic world. Navient is in the process of transitioning all their portfolios to a new company called Aidvantage, owned by Maximus. Make sure you review all the terms and conditions for any new servicer. If you are unsure who holds your loan account, you can find a complete list of your federal loans at Studentaid.gov.

Another important thing to understand is that the loans will now restart accruing interest. Your interest rate will return to the same rate as you previously held unless you agreed to a variable interest rate. Any automatic payments will be withdrawn on the same day as they were originally scheduled before the collection pause, meaning that the February 1st resumption does not necessary mean you will see a withdrawal on that date.

The last two years may have brought other life changes such as shifts in employment status. Contact your servicer to find out if you qualify for an income-driven repayment plan if you have any concerns about being able to make your monthly payment. The servicer will be able to walk you through your options for potential relief or forgiveness programs. It is also possible to refinance or consolidate your loans to get a lower interest rate and qualify for a lower monthly payment. Make sure to research your options for refinancing lenders and shop around for the best possible interest rate. Understand that those lenders are private companies, and your student loans would no longer be federally held. This would impact your ability to qualify for certain government relief programs such as Public Service Loan Forgiveness.

If you are still feeling anxious about the upcoming collection resumption, the best thing you can do is to contact your servicer to understand all your options. There are also resources available to help you understand the repayment process at StudentAid.gov. Now is the best time to recalculate your budget and make a plan for future loan payments.