Federal student loan payments are set to resume soon. Here’s what you need to know.
The End of the Federal Student Loan Pause: What Borrowers Need to Know
The federal student loan pause, which has provided relief to borrowers for over three years, is finally coming to an end in October. This long-awaited expiration comes after multiple extensions under both the Trump and Biden administrations. Unfortunately, Congress has prohibited President Joe Biden from extending the pause again as part of the debt ceiling package.
Important Information for Borrowers
With only 12 days left until the pause ends, it’s crucial for borrowers to be aware of the upcoming changes. Here’s what you need to know:
- When do payments restart?
- How much will the payments be?
- What kind of repayment plans are there?
- Who services the loan?
Starting from October 1, borrowers will be required to make their monthly loan payments. However, it’s important to note that not everyone will have the same due date. Borrowers can expect to receive their bill at least 21 days before the payment is due, which will clearly state the payment amount and due date.
Spring graduates, on the other hand, have a grace period before they need to start making payments. Typically, this grace period lasts for six to nine months after leaving school.
Borrowers can anticipate their monthly payment to be the same as it was before the COVID-19 pandemic pause. Unless any optional payments or changes were made to their account, such as loan consolidation, the payment amounts remained frozen during the pause.
It’s important to note that interest began accruing on September 1. However, until September 30, 2024, the federal government is providing an “on-ramp period” where borrowers are shielded from other normal consequences of missing a payment, such as defaulting on the loan.
By default, borrowers are enrolled in a standard 10-year repayment plan. However, there are various other repayment plans available.
Typically, borrowers opt for income-driven repayment plans, which base payments on income and family size rather than the amount of debt. Under this plan, borrowers are required to recertify their income annually. If income changes, the loan payments will also adjust accordingly.
It’s important to consider that while a repayment plan may lower monthly payments, it can increase the overall amount paid over time due to interest and potentially extend the loan’s repayment period.
A new repayment plan called Saving on a Valuable Education (SAVE) was launched this summer, offering generous terms and smaller monthly payments for lower-income borrowers. However, borrowers enrolled in the Revised Pay As You Earn (REPAYE) Plan were automatically switched to the SAVE plan.
Many borrowers will find that their loan servicer has changed since the pause went into effect in March 2020. Companies like FedLoan and Navient have ended their contracts with the Department of Education during the pause. Loans previously serviced by these companies will now be transferred to Aidvantage, EdFinancial, Nelnet, or Missouri Higher Education Loan Authority (MOHELA), as reported by CNN.
Borrowers can check the federal student aid website to find out which provider will be servicing their loans.
As the federal student loan pause comes to an end, it’s crucial for borrowers to stay informed and prepared for the upcoming changes. Make sure to review your repayment plan, payment amounts, and loan servicer to ensure a smooth transition.
What repayment options are available for borrowers?
Interest waiver” for qualified borrowers, which means that interest will not be capitalized during this period. This is a great opportunity for borrowers to save money and reduce their overall loan balance.
Borrowers have a variety of repayment options available to them, including income-driven repayment plans, which base monthly payments on their income and family size. This can be especially helpful for borrowers who are facing financial challenges or have a low income.
Additionally, borrowers can explore loan forgiveness programs such as Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness. These programs provide eligible borrowers with the opportunity to have their remaining loan balance forgiven after meeting certain criteria.
If borrowers are unable to make their monthly payments, it’s important to reach out to their loan servicer as soon as possible. They may be able to offer temporary relief options such as deferment or forbearance, which can temporarily suspend or reduce loan payments.
It’s important to note that interest may continue to accrue during these periods, so it’s advisable to explore all available options before making a decision.
Conclusion
The end of the federal student loan pause is approaching, and borrowers must be prepared for the changes that await them. Understanding the restart of payments, the amount of payments, repayment options, and available assistance is crucial in navigating this transition successfully. By staying informed and exploring the options that best suit their circumstances, borrowers can effectively manage their student loan obligations and work towards financial stability.
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