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Student loan payments restart: Everything you need to know about federal pause ending

Rachel Schilke September 19, 01:06 PM September 19, 01:06 PM Video Embed

The federal student loan pause is ending at the beginning of October, meaning borrowers will be required to start their monthly loan payments for the first time in more than three years.

The pause, which was extended multiple times under the Trump and Biden administrations, will finally expire this fall after Congress prohibited President Joe Biden from extending it again as part of the debt ceiling package.

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Here’s what borrowers need to know before the pause ends in 12 days.

When do payments restart?

Payments will be due starting Oct. 1, but not everyone will have the same due date.

Borrowers can anticipate receiving their bill at least 21 days before the payment is due. The bill will list the payment amount and due date.

Spring graduates do not have to make payments until the grace period ends, which is typically six to nine months after leaving school.

How much will the payments be?

Borrowers can expect the monthly payment to be the same as it was before the COVID-19 pandemic pause. Unless a borrower made optional payments or changes to their account, such as consolidating loans, their payment amounts were essentially frozen.

Interest began accruing on Sept. 1. Through Sept. 30, 2024, the federal government is providing an “on-ramp period” where borrowers are shielded from other normal consequences of missing a payment.

Normally, a loan goes into default after a borrower fails to make a payment for 270 days, or nine months. Once in default, it can make buying a car or house more difficult. Borrowers could also see federal tax refunds or a portion of their paycheck withheld.

What kind of repayment plans are there?

Borrowers are automatically enrolled in a standard, 10-year replacement plan. However, there are several different repayment plans.

Typically, borrowers will pay back their loans through income-driven repayment plans. The plan bases payments on income and family size as opposed to the amount of debt. Borrowers under the income-driven repayment plan are required to recertify their income once a year. If income increases or decreases, so will the loan payments.

However, borrowers should be aware that if a repayment plan lowers monthly payments, it may increase how much is paid back over time due to interest and could also extend how long it takes to pay the loan off.

Saving on a Valuable Education, or SAVE, is a new repayment loan plan that launched this summer. It offers the most generous terms and offers the smallest monthly payment for lower-income borrowers.

Borrowers can expect to be enrolled in the same repayment plan that they were in before the pandemic. However, those enrolled in the Revised Pay As Your Earn, or REPAYE Plan, were automatically switched to the SAVE plan.

Who services the loan?

Millions of borrowers are going to receive a different loan servicer than the one they had in March 2020, when the pause went into effect.

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Companies such as FedLoan and Navient ended their contracts with the Department of Education within the last three years while the pause was in place. Now, loans serviced from those companies will be transferred to Aidvantage, EdFinancial, Nelnet, or Missouri Higher Education Loan Authority, known as MOHELA, according to CNN.

Borrowers may check the federal student aid website to find out which provider will be servicing their loans.

© 2023 Washington Examiner

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