The end of the student loan moratorium is approaching, with payments due starting in September.1 After more than two-and-a-half years of no student loan payments and 0% interest,2 you might be worried about how to afford payments again.
That concern is totally fair, given that the average monthly student loan payment for bachelor’s degree holders is a hefty $448, according to the Education Data Initiative.3 But you can prepare by taking these steps below.
1. Review your student loans
First, review your loan balances and other details by signing into your Federal Student Aid account.
“Confirm the status of your loans and repayment,” suggests student loan expert and certified student loan counselor Andrew Pentis. “Given the long moratorium on payments, you could be returning to a different balance, monthly payment, or even loan servicer. You might even have to retrace past steps like signing up for autopay.”
2. Create a budget
Your next step is to create a budget if you don’t have one already. Write down how much money you make and spend each month. Record your recurring expenses, such as rent, utilities, and car insurance, as well as nonessential expenses, too, like clothing purchases or eating out.
One way to balance your spending is to use the 50/30/20 rule of budgeting. With this approach, you spend 50% of your after-tax income on needs, 30% on wants, and 20% on savings or paying off debt.4
Once you’ve made your budget, you can find ways to save. “If there are costs to cut, it will be apparent when you look at all of your spending,” says Michael Lux, attorney and founder of The Student Loan Sherpa.
Quick tip: It’s easy to manage your budget by linking your financial accounts on Upwise. Your information is protected just like with a bank or brokerage app, and you see everything in real time.
3. Cut back on discretionary expenses
“The best way to make room in the budget for any expense is to trim the fat,” says Lux. Some ideas:
If you tend to go to restaurants or bars, consider cooking more at home, meal prepping, or having pot luck dinners with friends to save money.
If you spend a lot on entertainment, such as concerts or plays, search around for free or low-cost activities in your area.
Scrutinize your bills for any recurring subscriptions—from streaming services to grocery delivery to gym memberships. Cancel any that you don’t really use.
Quick tip: Use our Subscription Buster tool to help save on services you don’t need or use anymore.
4. Consider some bigger changes
If cutting back on your “wants” isn’t enough to make your student loan payments, it may be time to look at your bigger expenses, like for housing and transportation. You could free up hundreds or even thousands of dollars in your budget each month.
Consider downsizing to a more affordable place or getting a roommate or two. If your car payment is breaking the bank, think about trading in your vehicle for a less expensive one. You might also shop around for car insurance to see if you can find a plan with lower premiums.
5. Increase your income
Saving is only one side of the coin for keeping more money on hand. The other side is increasing your income, which you could accomplish by picking up a side gig, asking for a pay raise, or switching to a new job.
“Your budget is finite—you can only cut so much,” says Pentis. “Your income, on the other hand, has no real ceiling. And the more income you have, the larger student loan payment you can make, and the faster your balance will reach zero.”
From freelancing online to driving for a ride-sharing service to delivering groceries, there are plenty of opportunities to earn some extra cash.
You could also think about working towards getting a pay raise or promotion at work. And see if your company offers student loan assistance benefits, which could help pay down your balance.
6. Research student loan repayment plans
If despite your best efforts, you find that your student loan payments are more than you can afford right now, a repayment plan might be a good option.
“Keeping student loans affordable starts with finding the right repayment plan,” says Lux. You can use the Department of Education’s Loan Simulator tool to estimate your monthly payments on the various plans.
These include four income-driven repayment plans:
- Income-Based Repayment
- Pay as You Earn
- Revised Pay as You Earn
- Income-Contingent Repayment
For more on these plans, see “What are federal student loan consolidation, repayment, and forgiveness programs.” Keep in mind that with these repayment plans, the amount you owe could grow due to interest accruing on your unpaid balance, which is likely to be higher since you’re paying less each month and any interest that’s not covered by your lower payments gets added to the balance. If you can’t afford any payments when they are set to resume, deferment and forbearance are options, too. Proceed with caution, though, as interest charges might accrue while your payments are paused.5
Private student loans are not eligible for these federal repayment programs, but talk to your lender—they might be willing to help if you’re falling behind.