Many borrowers have taken a break from student loan payments for more than three years. But the payment pause is coming to an end this summer. And this time, pandemic-related extensions are off the table because of a provision in the debt ceiling deal that prohibits the Biden administration from doing so again.
If you're one of the roughly 43.5 million student loan borrowers in the U.S. who needs to prepare for the payment return, we've jotted down a few things you should keep your eyes on this summer.
Image source: Getty Images.
Student loan payments are coming back
After a three-year payment holiday, millions of Americans will have to make room in their budgets for the return of student loan payments this fall. The word is out that payments will be due starting in October, but you should receive a notification before your due date letting you know all the details.
In the meantime, go to studentaid.gov to update your contact information. This is also a good time to find out if your loan servicer changed, and reach out to them if you have any questions.
Interest will start accruing again
The pause on student loan payments in March 2020 came with another deal: a 0% interest rate on student loans. The interest rate drop may have easily saved borrowers thousands of dollars. But interest is scheduled to start accruing again on Sept. 1.
If you have a federal student loan, you'll typically have a lower interest rate than with private student loans. Your interest rate will vary depending on your loan type and the first disbursement date of the loan. Contact your loan servicer if you have questions about your interest rate. This will give you a better idea of how much you'll have to repay.
There's more than one repayment option
If the standard repayment option doesn't work for your budget now, you can check out other repayment options.
The Department of Education, for example, finalized the "Saving on a Valuable Education" plan. If your income meets the threshold, your monthly payments could drop to zero under the SAVE plan. Other borrowers could end up keeping more than $1,000 in their pocket every year.
You don't have to wait until payments resume to set yourself up with a good repayment option. You can use the loan simulator tool on the Federal Student Aid website to view your options and see what you qualify for.
Student loan forgiveness is still a dream
Borrowers were hoping to have up to $20,000 worth of student loan debt wiped away under the Biden administration's loan forgiveness plan. But the cards didn't work out that way.
Last week, the Supreme Court struck down the Biden administration's student loan forgiveness plan. President Biden shared alternative ways to reduce the debt burden, including a 12-month grace period for loan payments.
Let's say cash is tight and you're not able to make student loan payments this fall. Biden's temporary "on-ramp" repayment plan won't subject you to the harshest penalties. You don't have to worry about your missed payments impacting your credit score since they won't be reported to the credit bureau, referred to credit agencies, or placed in default. This gives you some time to get your finances in order before the pressure to make payments kicks in.
Start planning ahead for student loan success
Although Aug. 30 is around the corner, you still have some time to research your options and adjust your finances to make sure you're on track to submit your payments on time. But even if you're dealing with budget constraints, there are still options available to ensure student loan debt doesn't weigh you down. By starting now, you can make sure you have what you need to crush your student loan goals for the rest of the year.
