STUDENT LOAN REPAYMENT PAUSE ENDS
AUGUST 30, 2023:
HERE’S WHAT YOU NEED TO KNOW
Millions of federal student loan borrowers have had their federal student loan and interest payments automatically suspended during the Coronavirus pandemic pursuant to The Coronavirus Aid, Relief, and Economic Security (CARES) Act. Relief under the Act was extended several times throughout the pandemic. While borrowers could continue to pay their loans during the pandemic, only about 1% chose to do so.
On August 30, 2023, that relief will come to an end and there will be no more extensions. As a result, student borrowers need to prepare for repayment of their federal student loans. The Department of Education has announced that interest will resume starting on September 1, 2023, and payments will be due starting in October 2023.
If you have federal student loans, here are the actions you need to take NOW so you will be ready for repayment in October.
The Office of Federal Student Aid (FSA) at the U.S. Department of Education recommends that every federal student loan borrower take the following steps to be prepared for repayment:
- Update your contact information in your profile on your loan servicer’s website and in your StudentAid.gov profile.Please note that your loan servicer may have changed in the last few years during the pandemic. The links provided above will help you identify your current loan servicer and any information you need about the type of loans you hold, your loan balance, and payment history. You can also call the Federal Student Aid Information Center at (800) 433-3243.
- Review your auto-debit enrollment or sign up for the first time (to have monthly payments made on-time, directly from your bank account). To do so, log in to your loan servicer’s website or contact your loan servicer directly.Please note that auto-debits will not restart automatically for some borrowers. If you were on auto-debit before March 13, 2020, your servicer will contact you before the payment pause ends to confirm whether you want to stay on auto-debit. If you do not respond to these messages, your servicer will cancel your auto-debit. If you signed up for auto-debit after March 13, 2020, your auto-debit should be active, and while payments should resume on your due date, it’s always a good idea to check with your loan servicer.
- Check out FSA’s Loan Simulator to find a repayment plan that meets your needs and goals or to decide whether to consolidate.
- Whether you are entering repayment for the first-time or reentering repayment, there are loan repayment plans available that may be helpful to you including updated income-driven repayment (IDR) plans that can make your payments more affordable, depending on your income and family size. You might also be eligible for deferment or forbearance to temporarily stop or lower your payments. Talk to your loan servicer to find the option that is best for you.
It’s best to start making plans for repayment as soon as possible. As the August 30 date nears, it’s more likely that FSA phone lines and internet pages will be seeing significantly increased traffic and wait times to get assistance could increase.
Frequently Asked Questions [updated October 19, 2023]
(See also the FAQs on the FSA website: https://studentaid.gov/announcements-events/covid-19#questions)
What will my payments be when repayment starts? Will my interest rate be different than it was before the pandemic?
The best thing to do is to contact your loan servicer if you have questions. In general, your repayment amount will depend on the repayment plan you are enrolled in. For standard, graduated, or extended plans, your loan servicer may recalculate your payment. For income-driven repayment (IDR) plans, your payment amount will stay the same, unless you recently switched IDR plans or recertified your income and family size.
For borrowers enrolled into an IDR plan, recertification happens every year. During the payment pause, the annual recertification was paused. Borrowers on IDR plans will not be required to recertify their information before their payments resume. The earliest you will be required to recertify is six months after the pause ends. If your recertification date falls between now and six months after the pause ends, it will be pushed out by one year.
For many borrowers, the interest rate(s) will be the same. For some borrowers, the interest rate may be different if you consolidated your loans during the repayment pause. Again, you can contact your loan servicer to find out the exact interest rate on your loans.
How do I know what repayment program is right for me? Should I consolidate my debt?
These are all questions best answered in conversation with your loan servicer. Your servicer will be able to provide the most current options for repayment programs based on your personal financial situation. Consolidation of loans might not always be the best option. To find out more about repayment plans that might work for you, and learn more about loan consolidation, check out the FSA Loan Simulator and additional information from FSA, https://studentaid.gov/announcements-events/default-fresh-start.
My loans were in default before the pandemic, so what do I do now?
You will be required to make payments once the payments pause ends. Consider rehabilitating your loans unless you did so during the pandemic. Consider the Fresh Start initiative (see more below) if your loans are eligible.
What is the Fresh Start Program for Defaulted Borrowers?
Announced in April, 2022, Fresh Start is a one-time temporary program from the U.S. Department of Education (ED) that offers special benefits for borrowers with defaulted federal student loans.
Borrowers who have eligible federal loans will automatically get some benefits through Fresh Start, such as restoring access to federal student aid (loans and grants). But borrowers need to act to claim the full benefits of Fresh Start and get out of default. There’s a limited time to take advantage of this program, so if you are a defaulted borrower who might qualify, it’s important to act soon. To do this, you must contact your loan holder. Your loan(s) may be held by the ED or by a guaranty agency. Find out more at https://studentaid.gov/announcements-events/default-fresh-start.
I believe I have a loan held by ISAC. Who do I contact about that?
ISAC is no longer a guarantor for federal student loans. ISAC’s FFELP Guarantor portfolio was officially transitioned to ECMC, the successor guarantor designated by the U.S. Department of Education early last year.
We recommend that you visit the Student Aid website or access NSLDS to locate your current holder/servicer. You can also call the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243 for more information. Please note that FSA will not have information on private loans.
What happened to the Student Loan Debt Forgiveness Plan that the Biden Administration announced?
In August 2022 the Biden-Harris Administration announced a Student Loan Debt Relief Program applicable to a wide variety of federal student loans. The program would have provided up to $20,000 in one-time debt relief for borrowers whose adjusted gross income was less than $125,000 ($250,000 for couples) in 2020 or 2021. Implementation of the program was blocked by courts in response to several legal challenges to it, and ultimately by the U.S. Supreme Court. In the meantime, in June 2023 President Biden vetoed legislation that would have cancelled the administration’s debt relief program.
With the end of the pause on student loan repayment, payment obligations resumed in October. Student borrowers who may be struggling with payments are encouraged to research available repayment plans at studentaid.gov.
Are there other loan forgiveness programs I should know about?
There are a variety of loan forgiveness programs at the federal and state level. One of the largest federal student loan forgiveness programs is the Public Service Loan Forgiveness (PSLF) Program, which forgives the remaining balance of a federal loan borrower’s Direct Loans after they have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. If you work for a government or non-profit organization, you should see if you might be eligible for PSLF. Visit the FSA PSLF webpages for more information. Help in understanding and applying for PSLF is also available through ISAC.
The State of Illinois offers help with student loan repayment for Illinois residents who qualify based on certain eligibility requirements. Typically, qualifying borrowers are those who have made an obligation to work in Illinois for a specific amount of time in a field that has experienced a shortage of workers (for example, teaching or nursing). Find out more about Illinois loan forgiveness programs at https://www.isac.org/students/after-college/forgiveness-programs/.