When Do You Have to Start Paying Student Loans?

There has been a lot of confusion surrounding the dates for when students will have to start making payments on their federal student loans. It’s easy to understand why, as the timeline has been uncertain. However, the end of the federal student loan payment pause is now within sight. The U.S. Department of Education has confirmed that after a three-year moratorium, federal student loans will begin accruing interest again on September 1, with payments becoming due in October. 

This move comes after various speculations and recent restrictions that prohibited further extensions of the payment pause. In fact, the debt ceiling bill mandated that the Biden administration must conclude the pause no later than August 30, providing borrowers with a solid date to anticipate. 

If you’re one of the 43 million borrowers with federal loans, read on to familiarize yourself with when you need to resume making student loans.

Understanding the student loan payment pause

Due to the impact of the pandemic, federal student loans were placed on a three-year pause, which meant that borrowers didn’t have to make payments and interest didn’t accrue. However, starting from September 1, the pause will end, and interest will begin accruing again. This means that borrowers will need to resume making their monthly payments starting in October.

In response to the Supreme Court’s decision to overturn President Biden’s plan for student loan forgiveness, the president expressed his disappointment and frustration. However, he has pledged to explore alternative paths for student loan forgiveness. 

One such path involves using the Higher Education Act of 1965, which grants the Secretary of Education, rather than the President, the authority to address certain instances of debt through compromises, waivers, or releases. It’s important to note that this approach is also expected to face legal challenges, according to legal scholars.

When will student loan payments resume? 

In the upcoming fall, as federal student loan payments resume, the Biden administration aims to provide borrowers with some breathing space.

To facilitate a smoother transition, the Department of Education will implement a 12-month on-ramp program for repayment, starting from October 1, 2023, until September 30, 2024. This initiative aims to protect borrowers from severe repercussions resulting from missed payments.

Considering the recent warning from the Consumer Financial Protection Bureau, which indicates that approximately 1 in 5 student loan borrowers may face difficulties upon the resumption of payments, the extended period of repayment flexibility may prove crucial for these individuals.

Will the payment pause be extended again? 

According to reports, the student loan payment pause will not be extended beyond the current expiration date. 

But just because payments are resuming doesn’t mean that borrowers have to struggle to pay. President Biden and his administration are working on new actions to provide debt relief and support for student loan borrowers.

One of these actions is a rulemaking process initiated by the Secretary of Education, aimed at opening an alternative path to debt relief for as many working and middle-class borrowers as possible. This process will use the Secretary’s authority under the Higher Education Act to create a new pathway to debt relief.

What about Congress voting to roll back relief?

On June 30, 2023, the Supreme Court dealt a blow to President Biden’s plan to offer relief to millions of Americans burdened by federal student loan debt. In a 6-to-3 decision that divided along ideological lines, the Court held that the Department of Education lacks the authority under federal law to forgive such debt.

SoFi, a personal finance company that manages student loan refinancing products, announced that it is withdrawing its lawsuit against the Department of Education. The lawsuit, which was filed by SoFi in March, contested the Biden administration’s rationale for extending the pause on student loan repayments, arguing that it was both illegal and detrimental to its business interests.

With the recent signing of a bipartisan debt ceiling agreement, SoFi has decided to drop its legal challenge. The deal includes a clear timeline for the resumption of loan repayments, making the lawsuit unnecessary.

What will be your payment amount and due date?

You should receive your billing statement or notification at least 21 days before your payment deadline once the payment pause comes to an end. The statement will include the precise amount of your payment and the due date for it.

It’s important to note that if you’re unsure about the specifics or want to learn about programs or repayment assistance that you may be eligible for, it’s recommended that you contact your loan servicer directly. 

What happens to student loans in default? 

If you’ve defaulted on your federal student loans before the pandemic, don’t worry because you have a chance to get back on track with the Fresh Start initiative. This program offers a range of benefits, including the ability to improve your credit score by returning your loans to current status, as well as the removal of negative default marks on your credit report.

You’ll also have access to federal student aid and other government loans, like mortgages, as well as flexible repayment plans such as income-driven repayment. If you need short-term relief, there are options like deferment or forbearance available to you as well.

One of the great things about the Fresh Start program is that even after the student loan payment pause ends, collection efforts will be suspended. While access to federal student aid is available automatically, you’ll need to enroll in the Fresh Start program and agree to enter a repayment plan for some of the other benefits. Remember, you must enroll by September 2024 to get the full range of benefits, so don’t wait too long to take advantage of this opportunity.

How to prepare to start paying student loans again

As the student loan payment pause draws to a close, it’s important to start preparing to make payments again. Here are some steps you can take to get ready.

1. Find your student loan servicer

Your servicer is the company that manages your student loan payments. You can find out who your servicer is by logging in to your Federal Student Aid account or by checking your credit report. 

2. Get in touch with your servicer

Once you know who your servicer is, contact it to discuss your repayment options. It can help you understand what your monthly payments will be and what repayment plans are available to you. If you think you’ll struggle to make your payments, ask about different options like an economic hardship deferment to provide you with some relief. 

3. Adjust your budget

Take a close look at your budget and identify areas where you can make adjustments to accommodate your student loan payments. This might mean cutting back on non-essential spending, such as eating out at restaurants, going to the movies, or subscribing to multiple streaming services. 

4. Consider an income-driven repayment plan

If you don’t think you make enough money to comfortably cover your monthly student loan payments, you may want to consider an income-driven repayment plan. These plans base your monthly payment on how much you earn, which can make your payments more manageable, especially if you aren’t earning a lot after graduation. 

The Biden-Harris Administration recently announced a new income-driven repayment plan called the Saving on a Valuable Education (SAVE) plan. This plan is designed to be the most affordable repayment plan ever created, with the potential to cut borrowers’ monthly payments in half or even allow them to make $0 monthly payments.

Get Matched With Student Loan Refinancing Offers* In Less Than 60 Seconds

5. Research forgiveness programs

Forgiveness programs, such as Public Service Loan Forgiveness and Teacher Loan Forgiveness, are available to borrowers who work in certain fields and meet certain eligibility requirements. These programs can help you reduce or eliminate your student loan debt, so it’s worth doing your research to see if you qualify.

6. Add new sources of income

Finding additional sources of income can be key to making your student loan payments and staying on top of your finances. Here are some potential ways to earn more money.

• Part-time job: Taking on a part-time job can be a great way to earn extra income while still being able to focus on your studies or other responsibilities. Look for opportunities in your local community, such as working at a retail store, restaurant, or coffee shop.

• Freelancing: If you have skills in areas like writing, graphic design, or web development, consider freelancing. Platforms like Upwork, Freelancer, and Fiverr make it possible to find freelance work and connect with clients.

• Starting a side business: If you have an entrepreneurial spirit, starting your own side business can be a great way to earn extra income. Consider selling products online, offering services like tutoring or pet sitting, or starting a blog or YouTube channel to try to generate ad revenue.

• Gig economy jobs: The gig economy offers a variety of opportunities to earn money on a flexible schedule. Sign up for platforms like Uber, Lyft, or DoorDash to provide rides or deliver food.

• Renting out space: If you have a spare room in your home or apartment, you could rent it out on platforms like Airbnb or Vrbo. This can be a great way to earn extra income on a short-term basis.

Options for tackling student loan debt 

With the expiration of the student loan payment pause, you’ll want to prepare for payments to resume. If you’re struggling to make your payments, you still have options. From assistance programs to deferment, income-based repayment plans, and more, there are ways to ease into repayment and avoid falling further into debt. Remember, you’re not alone and help is available to ensure that you can manage your student loan debt and achieve financial stability.

FAQ