You’ve got questions about the restart of repayment. We’ve got answers.
When does repayment of federal student loans restart?
Interest will resume being charged on federal student loans on September 1, 2023. The first payments will be due in October of 2023.
Your loan servicer will notify you about the restart of repayment, including your payment due date and payment amount, at least six times between July and September of 2023.
Be sure to update your contact information with your loan servicer and on StudentAid.gov so you don’t miss these notices. Your payment will be due even if you do not receive a loan statement or coupon book.
Is repayment really going to restart this time?
Yes, the U.S. Department of Education has no choice this time but to restart repayment. The Fiscal Responsibility Act of 2023 requires repayment to restart 60 days after June 30, 2023. Any future payment pauses and interest waivers must be authorized by Congress.
Does this affect the President’s student loan forgiveness plan?
The U.S. Supreme Court blocked the President’s student loan forgiveness plan on Friday, June 30, 2023. Although President Biden is looking at alternative ways to implement broad student loan forgiveness, it’s unknown if it will pass.
In any event, repayment will restart regardless of what happens with student loan forgiveness.
Beware of scams claiming that you can apply for forgiveness through them. The President’s plan no longer exists, so nobody can help you apply for it. There are other federal student loan forgiveness programs, such as Teacher Loan Forgiveness and Public Service Loan Forgiveness. You can apply for them through your student loan servicer or on StudentAid.gov.
Remember: you don’t have to pay anybody anything to apply for student loan forgiveness.
Will my student loan servicer change?
This table shows the current servicers in the Direct Loan program*:
*List current as of June 30, 2023
Almost half of borrowers will have a new student loan servicer, as several loan servicers have dropped out of the Direct Loan program since the start of the pandemic. Here’s a guide to loan servicer changes:
- Borrowers whose loans were serviced by FedLoan Servicing are now serviced by MOHELA.
- Borrowers whose loans were serviced by Granite State Management and Resources (GMSR) are now serviced by EdFinancial.
- Borrowers whose loans were serviced by Navient are now serviced by AidVantage (Maximus).
- Borrowers whose loans were serviced by Great Lakes Higher Education will be serviced by Nelnet (transition in progress).
Will my interest rate change? What about my payment amount?
Interest rates on existing fixed-rate federal student loans will not change. They will be the same as they were before the payment pause.
For two-thirds of borrowers, the payment amount will be the same as it was before the pandemic. If a borrower made payments during the payment pause, their monthly payment may decrease to reflect the lower loan balance.
For the one-third of borrowers in an income-driven repayment plan, their monthly payment may change depending on fluctuations in the borrower’s income.
A new version of the REPAYE plan, called the SAVE plan, will cut payments on undergraduate debt in half, and also reduce payments on graduate student loan debt slightly.
How will I learn my payment due date and monthly payment amount?
Your student loan servicer will send out a half dozen notices of your payment due date and payment amount in July and August of 2023. You can also call or email your loan servicer to learn this information.
The notices will be sent by USPS, email, and telephone.
How can I plan for the restart of repayment? What can I do to prepare?
Carving out room in your budget for student loan payments may be a little stressful, but you can do it.
Start by creating a descriptive budget, where you track your spending for a month. Label each expense as mandatory (a need) or discretionary (a want). Also assign each expense to a broad category, like food, housing, medical care, and transportation. Sum the totals at the end of the month.
You can then compare the discretionary spending with the student loan payment. If the total exceeds the loan payment, you just need to cut the discretionary spending. That may be more easily said than done, but you can start by substituting free for fee, such as free TV instead of premium channels, a walk around the block for a gym membership, and public transportation for a car payment.
If eliminating all discretionary spending still falls short of the student loan payment, you may need to increase your income. Consider looking for a part-time job in the evening or weekends.
You can also consider switching repayment plans to one with a lower payment, such as extended or income-driven repayment.
Consider signing up for autopay, where your monthly student loan payment is automatically transferred from your bank account to the loan servicer. Not only will this ensure your payments are on time, but the loan servicer will provide a quarter of a percentage point interest rate reduction as an incentive, saving you money. Making the payment automatic also makes it easier to adjust to the lower budget for discretionary spending.
If I was signed up for autopay before the pandemic, will autopay restart automatically?
Autopay will not restart automatically. You will have to sign up again, because the loan servicers don’t know whether your payment information changed during the three and a half years of the payment pause and interest waiver.
What if I can’t afford to repay my federal student loans?
Even though the payment pause and interest waiver has ended, there are a few options for continuing a personal pause.
The economic hardship deferment, unemployment deferment and general forbearances suspend the repayment obligation for up to three years each. Interest may, however, continue to accrue during a deferment and forbearance. So, deferments and forbearances are best for short-term financial difficulty, such as unemployment and medical/maternity leave.
For a long-term financial difficulty, the income-driven repayment plans will base your monthly payment on a percentage of discretionary income, as opposed to the amount you owe. If your income is less than 150% of the poverty line, your monthly payment will be zero. (The SAVE plan will increase this threshold to 225% of the poverty line.)
Will there be any other forms of financial relief?
The SAVE plan will cut the monthly payments on undergraduate debt in half. Even payments on graduate debt will be reduced.
In addition, borrowers who start off with less debt will have the remaining debt forgiven after as little as 10 years, instead of 20 or 25 years. Borrowers who start off with less than $12,000 in debt will have the remaining debt forgiven after 10 years. Each additional $1,000 in debt increases the forgiveness point by a year. Thus, borrowers who start with up to $13,000 in debt will have the remaining debt forgiven after 11 years, and so on.
Will there be a grace period before payments are considered late?
There will be a 12-month on-ramp, ending on September 30, 2024, during this period late payments will not be reported to credit reporting agencies or turned over to collection agencies. Defaults will also not occur.
After the on-ramp is over, everything will revert to the way it was before the pandemic. A federal student loan payment will be considered late if it has not been made by 30 days after the due date. If a payment is more than 90 days late, it will be reported to the credit reporting agencies. If a payment is more than 360 days late, the loan will go into default. It is important to note that these timelines around late payments are relevant for federal student loans only. Private student loans follow a different timeline for processing and reporting late payments and vary by the institution.
Who can you call if you have questions about your student loans?
You can call your student loan servicer if you have questions about your student loans, including the interest rate, payment due date and payment amount. You can find your student loan servicer and contact information on StudentAid.gov.
You can also send a secure email to your student loan servicer through their website. Many offer an online chat option too. Some of them even offer self-service tools for updating your contact information.
If you can, contact your servicer now with questions. You will spend more time on hold if you wait until the last minute to ask your questions.
Will my loans be eligible for the Student Loan Interest Tax Deduction?
Yes. Interest will start being charged again on September 1, 2023, so federal student loan borrowers will once again be eligible for the Student Loan Interest Deduction. Up to $2,500 in interest paid on all federal and most private student loans can be excluded from income. This means you can claim the Student Loan Interest Deduction even if you don’t itemize. For most borrowers, this yields several hundred dollars in savings on their federal income tax returns.