Payments for student loans are starting again. Here’s what you need to know

After a three and a half year pause, federal student loans will begin accruing interest again on Sept. 1 for millions of borrowers. As the second biggest consumer debt category, pausing student loan repayments had a major impact on many borrowers’ financial stability, raising concerns that making monthly repayments again may be difficult.

According to Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, borrowers may now struggle to fit that payment back into their budgets for a variety of reasons. “The economy is different than it was three and a half years ago. Things like lettuce and rent are a lot more expensive than they were three and a half years ago. There also could have been a change in income circumstances since prior to COVID,” like job loss, having children and other situations where the money set aside for making loan payments has been otherwise absorbed, she said.

Watch the conversation between Mayotte and PBS NewsHour digital anchor Nicole Ellis in the player above.

Mayotte says the best thing borrowers can do right now is educate themselves about what student loan repayment options exist, understand those different options, how they work and prioritize paying the least amount over time. She warns that it’s easy to get caught up in the possibility of loan forgiveness, as it’s an attractive and popular topic. “For some people, pursuing a loan forgiveness program is the way to pay the least amount over time. But for most other borrowers, it’s going to be paying their loans off as aggressively as possible to reduce total interest costs,” she said.

The Department of Education’s loan simulator tool can be a big help in determining possible payment plans and monthly costs as borrowers budget for the added expense, Mayotte says. The Biden Administration’s Saving on a Valuable Education, or SAVE plan, a new income-based repayment plan, may also help address income disparities among borrowers. While different types of income-based repayment plans have existed for roughly 30 years, SAVE is considered to be the most generous, cutting payment prices almost in half for undergraduate borrowers and providing zero-dollar payment plans for lower income borrowers who qualify. Some borrowers have never had to make repayments because of the freeze, something Mayotte says is also a concern.

Looking ahead, people who may struggle with repayments are those who never finished their degree or certificate and may only owe $10,000 or $20,000. “They’re living paycheck to paycheck and their balance is so low that the income driven plans might not give them a lower payment than what they already had, depending on what their income is,” says Mayotte.

WATCH MORE: Borrowers face tough decisions as resumption of student loan payments approaches

Another group in this category is seniors. Mayotte says, “student loan borrowers are still looked at by most people, voters, policymakers as a young person’s issue.”. But, “half of all student loan borrowers are over the age of 30, a quarter are over 45 and the fastest growing population of borrowers that are struggling and carrying student debt are over 65. And those aren’t people that can anticipate their income going up by a lot over the next ten or 20 years.”

Despite the restart in payments, Mayotte and other experts believe that the Biden administration may try to seek some form of student debt forgiveness through a negotiated rulemaking process, which can take up to a year. If that does not go through, the Education Department can propose another form of student debt forgiveness to give relief to millions of borrowers.