Repayments on many direct student loans were suspended during the Covid-19 pandemic. But this past summer, the Supreme Court ruled that the respite is over and payments must restart—many of which have already.

That means a major expense is reappearing in many people’s budgets. Below we offer some advice on how to prepare your finances to cushion the blow.

Student Loans Have Restarted. What Should I Do Now?

Many borrowers benefited from the extended deferral of interest and payments on their student loans, which was introduced in the CARES Act of 2020 as part of the U.S. government’s response to the outbreak of the COVID-19 pandemic.

The move was meant to help Americans meet the challenges of the pandemic like job layoffs, loss of income due to sickness, and additional childcare costs as schools across the country shifted to remote learning.

After several extensions in consideration of the continuing challenges from the pandemic, the Supreme Court ultimately struck down the Biden administration’s student loan forgiveness plan. On September 1, 2023, interest charges were “unfrozen” on federal student loans with most repayments set to resume in October 2023.

The change affects most outstanding student loans issued by the Department of Education, as well as some defaulted loans or expired programs taken over by the federal government.

You can log into the Department of Education’s financial aid website to find out more information about your loan servicer and how to restart your payments.

Same Loan, New Reality

The resumption of payments presents a significant financial challenge for many people. Many of the loans were issued in the years before the pandemic when interest rates and inflation were much lower than they are now.

While rates on most of the affected loans are fixed, people must now balance that expense with much higher payments on other existing debts—from credit cards to car loans to mortgages—as well as higher costs on everything from groceries and gas to rent, medical expenses, and childcare.

That is putting pressure on a lot of pocketbooks. After getting used to having wiggle room every month, many are seeing that their budget is not stretching far enough and are finding they need to cut back on other necessities or regular expenses.

In many cases, even a small extra monthly payment may force people to start dipping into valuable savings or to start accumulating debt on a credit card or store account as they struggle to cover their costs.

Smart Tips for Tough Times

If you are concerned about making your student loan payments and covering your expenses without going into debt or dipping into savings, consider taking the following steps to make your finances “repayment-ready.”

1. Take Stock

Assess your budget—and if you don’t have one, create one. Take stock of your income, monthly bills, spending on necessities, and other financial obligations you have. Look carefully at where your discretionary spending is going and where you could trim it.

You should also contact your loan servicer and review the terms of your loan. Make sure you understand:

• How much you owe in total and your loan’s interest rate

• How much you are going to be paying each month

• The day of the month your loan is due

• How long it will take to pay your loan and how much you will pay in interest over this time

• Options for paying down your loan early

2. Make It Automatic

A missed payment on your loan will attract a fine and possibly a higher interest rate on the overdue amount. On-time payment is also the single biggest factor affecting your credit score, while missed payments stay on your credit history for up to seven years.

Commit to paying off your loans and avoid missed payments by setting up an automatic payment order on your checking account. Set the date to shortly after your monthly salary is paid and before the due date for your monthly loan payments.

3. Start an Emergency Fund

Start building an emergency fund as a buffer against unexpected events. With money getting tighter, a major unforeseen cost or a loss of income could derail your repayments, deplete your savings, or force you into debt.

Many experts recommend saving the equivalent of about three months’ expenditure on your emergency fund. That might seem like a lot, but start by simply putting aside whatever you can every month. Every little bit helps.

4. Find Extra Income

Consider ways to make a little extra money to offset the amount you’ll be spending on your loan. That might mean picking up overtime shifts, taking on an after-hours job, or getting a little more serious about a side hustle.

5. Check Your Plan

The Department of Education offers a choice of loan repayment plans to meet different financial situations. Consider which one might be best for you. Income-driven plans take your monthly earnings, your age, and even the size of your family into account when calculating payments.

While it might take you longer to pay off your loan, extending the term of a fixed-interest loan can help you take advantage of other opportunities along the way like buying a house, starting a family, or pursuing your career.

6. Consult a Financial Advisor

Unsure if you are ready to resume payments? This might be a perfect time to consult a certified financial planner to help you:

• Figure out the best repayment plan

• Make an effective budget

• Plan for other financial goals or commitments in your life

Many local credit unions offer financial planning services to their members. Listerhill Credit Union, for example, offers counseling and help with major financial decisions through our support team of in-branch Member Advocates.

The Financial Tools You Need

Listerhill also offers a range of financial services designed to help you manage your finances better and save money—which is just what you need when money is tight.

Savings Accounts

Listerhill has all the products you need to start setting money aside for your loan payments as well as accounts for saving for a better future, including:

• Share Savings accounts: the ideal place to keep money separate from your everyday expenditures, with interest on all deposits over $5

• Money Market accounts: offer competitive interest rates to help grow your savings while keeping your money instantly available

• Certificate or CD accounts: for when you are ready to commit to long-term savings to build towards a brighter future

• Individual Retirement Accounts: because planning for your long-term financial security is too important to put off until later

Everyday Checking

Your checking account is the engine room of your financial life. Listerhill’s Everyday Checking account is the perfect place to manage your day-to-day expenses and automate important transactions like your monthly loan payment.

Our Everyday Checking accounts offer:

• No minimum balance

• Free online banking

• Unlimited check writing

• Overdraft refunds

Best of all, as a member of the National Credit Union Association, all of Listerhill’s deposit and term accounts are insured by the federal government up to a value of $250,000 per account. That makes investing in a Listerhill account among the safest money moves you can make.

Credit Cards

Used wisely, a credit card brings flexibility and convenience to your finances with a single, well-timed payment for multiple expenses. Listerhill offers competitive rates on all our credit cards with no annual fees.

In addition, our Signature Rewards Card earns 2% cash back on every purchase, putting money right back in your pocket whenever you use it. Shifting spending to your Signature Rewards Card is a great way to generate a little extra cash on everyday expenditures.

Listerhill Credit Union: Your Smart Finances Partner

As a not-for-profit, member-owned financial cooperative, Listerhill Credit Union is deeply invested in our members’ long-term financial success.

That’s why we focus as much on your overall financial wellness as we do on offering highly competitive products designed to make saving money and managing finances easier.

Contact us today to set up an appointment with one of our financial advisers or click below to learn more about how to make your credit card work better for you.

How to Use Your Credit Card Wisely [Guide]