Sept. 1 marks the end of federal debt payment pause for student loans. Here’s what you need to know.
Student Loan Payments and Interest Accumulation to Resume Next Month
Exciting news for federal student loan borrowers! After a three and a half year pause, student loan accounts held by the federal government will begin collecting payments and accumulating interest once again starting next month.
In March 2020, due to the impact of the COVID-19 pandemic, the federal government announced a pause on student loan payments and interest accumulation. This pause has been extended multiple times, effectively freezing outstanding balances for federal student loans for the past three years.
But now, the wait is finally over. On September 1, the pause will come to an end, and interest on federal student loans will start accumulating. Borrowers will need to resume their monthly payments in October.
Wondering what you need to do? Here’s everything you need to know:
When does the student loan payment pause end?
The pause on federal student loan payments officially ends on September 1, according to the U.S. Department of Education’s Office of Federal Student Aid. Starting from this date, interest will begin to accumulate on your federal student loan balances.
However, don’t worry about making payments right away. Monthly payments on student loans will not begin until October. This gives you some time to prepare and make necessary arrangements based on your repayment plans.
What information is available for borrowers?
The Department of Education has set up two dedicated websites to assist borrowers in getting ready for the resumption of payments. One website is for borrowers who haven’t made payments yet, while the other is for those who have previously made payments. Additionally, there is a separate website for borrowers who have defaulted on their loans.
It is highly recommended that you visit your loan service provider’s website for more information and to make plans for resuming payments before the October due date.
What else should I know about my payments resuming?
The Department of Education wants to ensure that borrowers are well-informed. They will provide a 21-day notice of the due date for your first student loan payment. If you enroll in auto-pay, you can enjoy a 0.25% reduction in your interest rate.
If you were previously enrolled in auto-pay before the pause, it is likely that you will need to re-enroll to continue receiving the benefits.
What if I can’t make payments?
Under the Biden administration, the Department of Education has made significant changes to the Income Driven Repayment program. This program allows borrowers to make payments based on their discretionary income, which is defined as income above the poverty line.
According to the new rules, borrowers will now be required to pay up to 5% of their discretionary income per month, instead of the previous 10%. Additionally, borrowers may qualify for loan forgiveness after making payments for at least 10 years, depending on the loan size.
If you would like to apply for the Income Driven Repayment program, visit the department’s SAVE plan website at https://studentaid.gov/announcements-events/save-plan.
Lastly, it’s important to note that missing payments will not result in loan default during a one-year on-ramp period that expires in September 2024. Your missed payments will not negatively impact your credit rating or be referred for collection.
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