Student loan payments are going to restart this fall, according to the U.S. Department of Education (DoE). Most federal student loan payments have been suspended without interest as part of Covid relief since March 2020.
Money expert Clark Howard says for many people, “It means you’re out of the habit and maybe not budgeting for that payment like you had been prior to COVID. And the reality is, don’t ignore it.”
This article will tell you everything you need to know about the status of the student loan debt relief plan, when payments will likely start and how you can prepare.
What’s the Latest News on Student Loans?
The Supreme Court struck down the Biden Administration’s student loan forgiveness plan, saying that it was an overstep of presidential authority. After the high court’s decision, President Biden vowed to continue the push for student loan forgiveness through a different path.
“We’re creating a temporary 12-month ‘on ramp’ to repayment,” Biden posted on social media. “This is not the same as the student loan pause, but during this period – if you miss payments – this “on ramp” will temporarily remove the threat of default or having your credit harmed.”
Even if the high court ruled in favor of the plan, it would not have changed the date for repayments to start.
After several extensions that paused federal student loan payments and interest, the U.S. government is set to start collecting from borrowers once again.
1. When Will Student Loan Repayments Restart?
The DoE financial aid website StudentAid.gov says, “Congress recently passed a law preventing further extensions of the payment pause. Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October. We will notify borrowers well before payments restart.”
The exact date that payments restart in October is as of yet unclear.
2. Can I Still Apply for Student Loan Forgiveness?
It says on StudentAid.gov, “Under the court’s ruling, the U.S. Department of Education has been prohibited from implementing the Biden-Harris Administration’s one-time debt relief program.” So, no, you can’t still apply. The recent Supreme Court ruling also means that even if you were previously approved for one-time debt relief that they will not be able to implement that coverage.
3. How Much Do I Owe in Student Loans?
Given the many legal and political specifics that need to be sorted out, it may be difficult initially to determine how much you owe in student loans.
Once things have settled a bit, you’ll need to log into studentaid.gov, where you can view your balance, payment status and more. Contact your loan servicer for specifics. Bear in mind that your loan servicer will likely be slammed with requests.
“With millions of borrowers transitioning into repayment at the same time, it is possible that loan servicers may be overwhelmed with a high volume of inquiries,” says a factsheet from the National Association of Student Financial Aid Administrators.
4. How Can I Prepare To Start Making Student Loan Payments Again?
Admittedly, after more than three years of not making any payments on your student loan, you might have to make some major adjustments to your budget to stay in the black.
Create a Budget
If you don’t have one already, it’s imperative that you create a budget. If you don’t seem to be able to balance your books the way you would like, perhaps you could explore a side gig to bring in more money.
Read our guide on easy side hustle ideas.
Consider Some Assistance
If the payments will be more than you can handle, consider hardship options based on the type of student loan you have.
“If your budget is really tight, if you are dealing with federal loans, you have access to income-based repayment plans,” Clark says. “Under the formulas, the payment you have to make to be considered to be current could be teensy-tiny.”
Refinance At a Lower Rate
Clark is a big fan of refinancing your student loans if you qualify for and can find lower rates. Admittedly, with interest rates and inflation at play right now, it’s going to be tough.
Nonetheless, if you have a variable interest rate and you’re able to find a meaningfully lower rate by getting a fixed one, you should go for it. A good credit score will work in your favor.
Final Thoughts
After a long pause, student loan repayments will resume this fall. And due to the Supreme Court’s recent decision, you shouldn’t expect loan forgiveness — even if you were approved previously. Do what you can now to prepare financially.
“The one thing you don’t want to do is ignore the requirement of payments going forward because, if you go delinquent, it’s not like those loans go away,” Clark says. “They don’t go away and you need to deal with them.”
When reaching out to your loan servicer, it’s a good idea to have all your documentation in order and to be sure to write down the specific due dates of your student loan(s) when that information becomes available.
