What to know as student loan payments resume next month

ALBUQUERQUE, N.M. — Come October 1, student loan borrowers will start paying on their loans for the first time since before the pandemic.

It’s a lot to navigate, so financial experts say you should prepare now – but what options do you have?

“It’s just natural that when you go that long without paying something, other things in your budget are going to kind of eat that space up,” financial planner Brian Walsh said.

The Consumer Financial Protection Bureau showed showed loan borrowers dramatically improved their credit scores beginning in 2020. That was due to the pandemic-related pause.

Now, that could change.

“So, we’re encouraging people to re-familiarize themselves with their student loans so they know what their balance, payment and interest is going to be,” Walsh said. “The best way to think about it is, there was just a pause. Where you were in February 2020, is where you’ll be in October.”

Some are taking the reckless route. Social media influencers are telling borrowers not to pay.

However, Miguel Cardona, the U.S. education secretary, says doing that could be disastrous.

Not paying means you could default on your loans. That risks wage garnishment and credit score hits.

For now, borrowers won’t face those penalties if they miss payments.

“We know many of our borrowers are going to struggle to make payments. We want to make sure that we’re not sending their needs to a credit agency. So, we’re going to hold them harmless for a year as they’re getting back up,” Secretary Cardona said.