If you had high hopes for Biden’s student loan forgiveness plan or for the pandemic-era payment pause on federal student loans to be extended again, you probably feel like nothing is going your way right about now.
The administration is saying they’re going to use the Higher Education Act of 1965 to push through some other amount of loan forgiveness, but that will likely meet the same fate as the last forgiveness attempt. The fact is, federal student loan payments will once again be due later this year, and interest will start accruing again after being fixed at 0% since March of 2020.
But, when is everything expected to happen, exactly? And what date do you need to be ready to begin repaying your student loan debt later this year? Here’s a rundown of all the key dates you’ll want to write on your calendar as the countdown to federal student loan payments begins.
August 1, 2023: SAVE Plan Application Opens
First, you should know you still have time to switch payment plans for federal student loans before the payment pause ends later this year. You could always move your loans to a longer repayment plan to get a lower monthly payment, or you could look into income-driven plans that let you pay a percentage of your discretionary income for 20 to 25 years before having your remaining balances forgiven.
You can also sign up for Biden’s new income-driven repayment plan called the SAVE plan. According to a late June 2023 press release from the White House, the SAVE plan will cut borrower’s required monthly payments in half, and more people than ever will qualify for a $0 monthly payment on their federal student loans while other borrowers will save at least $1,000 per year.
Individuals who sign up for the SAVE plan will also avoid having unpaid interest accrue on their loan balances, meaning they won’t see their balances grow over time if their monthly payment is less than the interest they owe each month. Borrowers on the SAVE plan who owe $12,000 or less on their federal student loans can also have their loan balances forgiven in 10 years instead of 20 years.
Because SAVE is an upgrade to the existing REPAYE income-driven plan, people already paying their loans on REPAYE will be automatically moved to the SAVE plan when it becomes available.
If you do plan to sign up for the SAVE plan or for another income-driven repayment plan, the U.S. Department of Education says you should do so as soon as possible.
ASAP: Re-certify Your Income for Income-Driven Plans
If you were on an income-driven repayment plan before the payment pause began in March of 2020, the Department of Education says you’ll have six months to re-certify your income and that this normally has to be done every year.
They also recommend doing this early to make sure you have the right monthly payment based on your current income and family size, and that you should do it “before August” if you can.
ASAP: Sign Up for Auto-Pay
All federal student loans and many loans from private lenders offer a 0.25% auto-pay discount when you enroll. This isn’t a huge discount by any means, but it can make a difference and help you save on student loan interest over the long run.
Studentaid.gov says you have until “before August” to enroll in auto-pay to qualify for the discount in your first monthly payment, and that you’ll need to re-enroll if you were using auto-pay before the current payment pause started in March of 2020.
This is important: if you were enrolled in auto-pay before the pandemic, that information is deleted and you need to re-enroll.
September 1, 2023: Student Loan Interest Resumes
According to Studentaid.gov, interest begins accruing on federal student loans on September 1, 2023 after being fixed at 0% for more than three years.
Since interest rates on federal student loans are fixed for the life of the loan, most borrowers will see their rates revert to whatever they were before the Covid-19 payment pause began. However, borrowers who consolidated their federal loans in the last few years with a Direct Consolidation Loan will see a new rate that uses a weighted average of the rates across all the loans they consolidated.
October 2023: Federal Student Loan Payments Resume
Student loan payments for federal student loans will resume sometime in October, but the dates your actual loan payments are due can vary depending on your loan administrator. According to studentaid.gov, you can expect to get your bill sometime in late September or early October and you’ll have at least 21 days before your due date once it’s sent.
If you want to make sure you’re receiving communications about required federal student loan payments, now is a good time to update your contact information on StudentAid.gov and your loan servicer’s website.
September 30, 2024: When Unpaid Student Loans Become Delinquent
The Biden administration also announced a 12-month “on-ramp” period that is meant to give borrowers some breathing room as they figure out how to afford the monthly payments on their student loans. This period will last from October 1, 2023 to September 30, 2024, and monthly payments won’t become delinquent during this stretch of time.
In fact, the White House press release says loans that go unpaid during this time “are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.” Note that borrowers do not need to take action to qualify for this on-ramp period, as everyone with federal student loans qualifies automatically.
This on-ramp period is set to last approximately as long as the Fresh Start program for federal student loans in default, which is set to end one year after the payment pause ends.
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