It's been more than three years since individuals with federal student loans had to make payments. The pause began under the Trump administration during the early days of the COVID-19 pandemic and was extended several times by the Biden administration.
But get ready to resume payments. Interest began accruing again on all federal student loans on Sept. 1. Student loan repayment resumes in October. Here are three major dates borrowers need to know.
Image source: Getty Images.
1. Dec. 31
The U.S. Department of Education will make a one-time adjustment of income-driven repayment (IDR) plan qualifying payments that will count toward loan forgiveness. Dec. 31 is an important date related to this one-time adjustment in a couple of ways.
First, some loans that don't qualify for the adjustment can be eligible for credit if they're consolidated into a Direct Consolidation Loan. These include any Federal Family Education Loan, Health Education Assistance Loan, and school-held Perkins loans. However, borrowers must consolidate these loans into a Direct Consolidation Loan before the end of this year for them to be factored into the IDR account adjustment.
Second, any student loan borrower who works in public service should submit a Public Service Loan Forgiveness (PLSF) form along with employment certification no later than Dec. 31. The PSLF program forgives remaining balances on Direct Loans after 120 qualifying monthly payments.
2. July 1, 2024
This date isn't as much of a deadline for borrowers as it is for the Biden administration. The Saving on a Valuable Education (SAVE) Plan offers several immediate advantages, including reducing monthly payments for many borrowers. But starting on July 1, 2024, the plan will have other benefits, including:
- Cutting all undergraduate loan repayments from 10% to 5% of income above 225% of the poverty level.
- Forgiveness of any remaining balance for borrowers with original principal balances of $12,000 or less who have made 10 years of payments.
- Allowing borrowers to make additional "catch-up" payments that allow them to receive credit for all other periods of student loan deferment or forbearance.
- Permitting borrowers who consolidate loans to receive credit for a weighted average of payments toward forgiveness based on the principal balance of the consolidated loans.
- Automatically enrolling borrowers who are 75 days late on repayments in IDR plans (assuming they've agreed to allow the Department of Education to securely access their tax information).
3. Sept. 30, 2024
The Department of Education is implementing an "on-ramp" for repayment of student loans beginning on Oct. 1. However, this period will last for only 12 months and will end on Sept. 30, 2024.
Any borrowers who miss monthly payments during the 12-month period won't be considered as delinquent. They won't be reported to credit bureaus for failing to make payments. Nor will they be referred to debt collection agencies.
There is no application or form to fill out to take advantage of this 12-month on-ramp. Borrowers can simply choose to not make one or more monthly payments on their student loans.
This on-ramp could help borrowers who encounter financial problems that make it difficult to make payments on their student loans. However, it's important to know that interest will still accumulate on the loans.
