Student loan accounts held by the federal government will begin collecting payments and accumulating interest next month, ending a three and a half year pause on payment requirements for federal student loans.
In March 2020, the federal government announced that student loan payments and interest accumulation would be paused due to the effects of the COVID-19 pandemic. The pause essentially froze outstanding balances for federal student loans in place for three years as the pause was repeatedly extended.
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On Sept. 1, the pause will end, and interest on federal student loans will once again accumulate, and borrowers will have to resume monthly payments in October.
A spokesperson for the Department of Education directed the Washington Examiner to its online resources on the resumption of student loan payments when contacted for comment.
Here’s everything you need to know about the restart of federal student loan payments:
When does the student loan payment pause end?
The pause on federal student loan payments officially ends on Sept. 1, per the U.S. Department of Education’s Office of Federal Student Aid. At this point, borrowers will see interest begin to accumulate on their federal student loan balances.
While the interest accumulation begins on Sept. 1, monthly payments on student loans will not begin until October, when borrowers will once again have to make payments on their loans in accordance with their repayment plans.
What information is available for borrowers?
The Department of Education has two websites dedicated to helping borrowers prepare for the resumption of payments. One for borrowers who have not yet had to make payments on their loans, and another for borrowers who have previously made payments. The department also has a website for borrowers who have defaulted on their loans.
Borrowers are encouraged to visit their loan service provider website for more information and to make plans to resume payments before the October due date.
What else should I know about my payments resuming?
The department says that borrowers will be given 21 days notice of the due date of their first student loan payments. Borrowers who enroll in auto-pay, will see their interest rate reduced by 0.25%.
If a borrower previously enrolled in auto-pay prior to the pause, the Department of Education says a re-enrollment is likely necessary.
What if I can’t make payments?
The Department of Education under the Biden administration has enacted significant changes to the Income Driven Repayment program, which allows borrowers to make payments based on their discretionary income, defined as income above the poverty line.
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Under the new rules, borrowers will be required to pay up to 5% of their discretionary income per month, half of the previously required 10%. Additionally, borrowers can qualify for loan forgiveness if they have made payments for at least 10 years, depending on the size of the loan.
Borrowers who would like to apply for the Income Driven Repayment program should visit the the department’s SAVE plan website at https://studentaid.gov/announcements-events/save-plan.
Additionally, borrowers who miss payments will not default on their loans during a one year on-ramp period that expires in September 2024. During that time, missed payments will not lead to a negative credit rating and will not be referred for collection.
