After about 3.5 years, the federal student loan repayment and interest pause is coming to an end. Interest is set to start accumulating on Sept. 1, and most federal student loan borrowers will have their first payment since 2020 due in October.

With an average student loan payment of nearly $400 per month, according to the Federal Reserve Bank of New York, it's fair to say that the resumption of student loan repayment will be a major financial burden on many U.S. households.

If you anticipate having trouble when your student loan payments are due, the Biden Administration has created a way to make it much easier -- at least for a while.

College students holding diplomas in the air.

Image source: Getty Images.

The repayment "on-ramp"

In the wake of the Supreme Court rejecting President Biden's student loan forgiveness plan, the administration released several "Plan B" initiatives to help reduce the burden of student loans on U.S. households, including the Saving on a Valuable Education (SAVE) Plan.

In addition, the administration created a one-year "on-ramp" to student loan repayment. The simple version of the on-ramp is that if you can't afford to make your student loan payments when they come due in October, you don't really have to.

During the on-ramp period, which starts Oct. 1, 2023, and ends on Sept. 30, 2024, borrowers technically have loan payments due. However, late or missed payments won't be reported to the credit bureaus. Borrowers who don't pay will neither be in default nor receive calls from collection agencies. And there is no application -- all borrowers who want to can take advantage.

However, interest will continue to accumulate, which could make your balance grow larger before you start to make payments.

Should you make your student loan payment in October?

The short answer is, "It depends." If you absolutely can't afford to make any student loan payments, the on-ramp is certainly a nice safety net to have.

However, there could be better alternatives than simply not paying. For example, the new SAVE Plan is designed to dramatically lower student loan payments for borrowers and is expected to set monthly payments at $0 for over 1 million additional borrowers. For example, a family of four making $60,000 per year would have no student loan obligation.

What's more, under the terms of the SAVE Plan, unpaid interest is not added to the principal. Further, missed payments under the on-ramp don't count toward student loan forgiveness programs. Payments made while enrolled in the SAVE Plan (even if they're $0) do.

In a nutshell, the on-ramp is best suited for people who aren't qualified for a $0 monthly payment under the terms of the SAVE Plan and could really use the flexibility to wait a few months to pay. If you can afford the payments, you should absolutely make them. But this provides a nice cushion so you don't have to worry about destroying your credit or being sent to collections if you can't.