If you’re one of the many Americans who graduated college with student loan debt, you probably already know that federal student loans are currently under administrative forbearance due to the COVID-19 pandemic.
And while this pause in payments has been helpful to those who have been using the extra funds for things like paying down other debt or saving up for a down payment, the U.S. Department of Education has announced that the forbearance will only last through May 1, 2022 as of now.
While this cutoff date has been pushed back in the past, we know how important it is to have a financial game plan for when payments do restart -- especially for those hoping to buy a home with student loan debt. With this in mind, here are some tips on how to prepare for your student loan repayments while also improving your financial wellness.
- Update your contact information on your loan servicer’s website. This will allow you to stay up-to-date with news about the COVID-19 forbearance as we get closer to the repayment date.
- Review your required monthly payment. If your previous repayment plan no longer works for you, consider asking your servicer about an income-driven repayment (IDR) plan, which will make your payments more affordable by matching them to your level of income.
- Enroll in automatic payments. It builds credit to pay your bills on time! Signing up for autopay plans can help you demolish your debt without even needing to think about payment deadlines.
- Calculate your DTI ratio. Debt-to-income ratios are an important factor when applying for a loan, since they help lenders estimate the amount of a borrower’s income that is allotted towards debt. You can improve your DTI ratio by paying down debts, switching to an IDR repayment plan, or refinancing your private student loans.
- Get pre-approved by a lender before starting your home search. Knowing the loan amount that you qualify for will help you stay in budget while you shop around for your dream home.
- Consider homeownership programs like those offered by TSAHC. Saving up for a down payment can be one of the biggest hurdles for getting into a home, but TSAHC offers multiple options for down payment assistance, available as either a grant (which never needs to be repaid) or a forgivable second lien loan. First-time home buyers may also qualify for a Mortgage Credit Certificate, which saves homeowners money on annual federal income taxes.
- Check out financial education and credit counseling opportunities. These nonprofit counseling services can help you improve your credit, reduce your debt, and gain better financial security. Find opportunities near you by visiting the Texas Financial Toolbox website.
- Visit StudentAid.gov for more resources involving student loan repayment and finding your student loan servicer.
If you’d like to start preparing to buy a home, we recommend visiting our “10 Steps to Homeownership” guide, which gives you a bird’s-eye view of the homebuying process.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.