Student loan payments will resume in October. What you need to know

For millions of borrowers across the U.S., the temporary relief from student loan payments will soon come to an end. As the economy continues to recover from the impact of the pandemic, student loan payments are set to resume in October. Borrowers need to understand the implications and be prepared for this transition. Let’s discuss key points to remember as you navigate the resumption of student loan payments and the major differences between the FICO Score vs. Vantage Score.

Understand the Resumption Date

According to recent announcements, student loan payments will resume in October. Interest will start accruing on September 1st. It is crucial to mark this date on your calendar and prepare yourself financially to resume making regular payments.

Review Your Repayment Plan

Take the time to review your current repayment plan. Evaluate whether it still aligns with your financial goals and circumstances. If necessary, consider changing your plan to a more suitable option. Federal student loan borrowers have various repayment plans available, including income-driven repayment plans that can help make payments more manageable.

Assess Your Financial Situation

With student loan payments resuming, it is an excellent opportunity to evaluate your overall financial situation. Take a close look at your income, expenses, and savings. This assessment will help you create a realistic budget that incorporates student loan payments. Prioritize your expenses and consider making adjustments to ensure you can comfortably manage your student loan obligations.

Build an Emergency Fund

An emergency fund is an essential financial safety net. It can provide peace of mind and protect you from unexpected expenses or financial challenges. As you prepare to resume student loan payments, make it a priority to build or replenish your emergency fund. Aim to save three to six months’ worth of living expenses so you have a buffer in case of unexpected events.

Familiarize Yourself with Loan Servicers

If you have federal student loans, familiarize yourself with your loan servicer. Your loan servicer is the company responsible for managing your student loan account and collecting payments. Keep their contact information readily available and stay informed about any updates or changes related to your loan.

Understand the Impact on Your Credit Score

Student loan payments play a significant role in building and maintaining your credit history. As you resume payments, you must know the impact on your credit score. FICO Score 9 is a credit scoring model commonly used by lenders to assess creditworthiness. It considers factors such as payment history, credit utilization, and length of credit history. Timely student loan payments can positively impact your FICO Score 9 and help improve your overall creditworthiness.

FICO Score vs. Vantage Score

When discussing credit scores, it’s important to understand the difference between FICO Score and Vantage Score. FICO Score is widely used by lenders and is considered the industry standard. Vantage Score is another credit scoring model that has recently gained popularity. While both scores are used to evaluate creditworthiness, they may vary due to differences in the calculation methodology. It’s advisable to monitor both scores to have a comprehensive understanding of your credit standing.

Bottom line

As the temporary relief from student loan payments comes to an end, it’s crucial to be prepared for the resumption of payments. Being proactive and informed allows you to navigate the transition smoothly and continue toward financial stability. Remember, resources and assistance are available if you encounter difficulties in managing your student loan payments.

Author: Harrison Pierce