Summary:
- Student loan interest is set to resume on September 1st, preceding the October deadline for payments.
- Borrowers are urged to log into the federal student aid website to identify loan services and begin planning repayments.
- Communication with loan servicers is crucial, and new repayment options such as the SAVE plan are available.
- Choosing not to make loan payments can have lasting negative impacts on credit scores and future financial opportunities.
- Tax implications on loan forgiveness are favorable, with forgiven loans not being taxed until January 2025.
With student loan payments becoming due in October, borrowers should be aware that interests on those loans will start accumulating on September 1st. Financial experts provide advice and options for borrowers to manage their repayments.
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Preparing for Loan Repayments
As the October deadline for student loan payments approaches, experts recommend taking proactive steps. Phil Schumann, the director of financial literacy at Indiana University, suggests logging into the federal student aid website or portal to identify loan services and begin making repayment plans.
Communication with Loan Servicer
Schumann emphasizes the importance of communication with loan servicers. Borrowers facing difficulty making payments are advised to contact their loan servicer to explore available repayment options. For those in need, a new income-driven repayment plan called SAVE can be applied for through the Department of Education's website.
The Impact of Choosing Not to Pay
Experts warn against ignoring loan payments, as this can have long-term financial consequences. Failure to make payments can negatively affect credit scores, hindering future borrowing opportunities such as buying a home or a car.
Tax Implications on Loan Forgiveness
Fortunately, borrowers do not need to worry about tax impacts on loan forgiveness. Schumann explains that, under current law, forgiven loans will not be taxed until January 2025. This provision offers significant relief to borrowers, allowing them to move forward with their financial lives.
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As the September 1st deadline for the resumption of student loan interest approaches, borrowers are advised to take proactive steps to manage their repayments. Open communication with loan servicers and exploring available options can help borrowers navigate this financial responsibility.