During the height of the COVID-19 pandemic, the U.S. Department of Education (ED) temporarily paused federal student loan repayments. While this repayment pause was extended several times during the pandemic, it has now come to an end.
As a result, borrowers with federal student loans will need to start making payments again as soon as October 2023. While the ED strives to make the transition as smooth as possible, please prepare to face some challenges as repayment starts back up.
If you have federal student loans, here’s what you need to know about the end of the student loan repayment pause and what you can do next.
Student Loan Repayments Restart in October 2023: What Does That Mean for Me?
Student loan repayments will resume as soon as October 2023, however, student loan interest accrual restarted on September 1, 2023. This means that anyone who benefited from the payment pause will begin to feel an impact when their payments resume.
It’s important to take early action and prepare to make payments. Here are some things you should do right away:
- Update your contact details on StudentAid.gov and your loan servicer’s official website. You can find your loan servicer here.
- Start looking into repayment plans that work with your financial situation. For borrowers on a fixed or low income, this might be an income-driven repayment (IDR) plan like the new SAVE plan (more details below). These plans offer more flexibility and lower payment amounts than most other options.
- If you enrolled in an IDR plan prior to the repayment pause, you can recertify your existing plan. You have the next six months or so to do this, but it’s best to act quickly. Depending on your household size and income, you may qualify for a lower payment amount.
- Look into student loan forgiveness programs. These are available for some federal loan borrowers, such as those who’ve worked in public service or have a qualifying disability.
If you have not already done so, now’s a good time to review your finances and determine your ability to repay your loans. If you're not able, and do not find relief, you could incur late fees or default on your loans.
Understanding the CARES Act
In response to the COVID-19 pandemic, Congress allocated nearly $4 trillion to economic relief. Roughly $1.9 trillion of this came from the CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act, which Congress passed in March 2020.
The purpose of the CARES Act was to offset the economic impact of the global pandemic on individuals, families, small businesses, and various industries. Among other things, the CARES Act:
- Offered fast economic relief in the form of $1,200 stimulus checks to eligible adults
- Offered unemployment insurance benefits
- Prevented the eviction of tenants or homeowners impacted by the pandemic
- Put a payment pause on certain types of loans (e.g., mortgages)
- Put a payment pause on certain types of loans (e.g., mortgages)
Regarding student loan relief, the CARES Act made it so student loans — specifically federal student loans — were eligible for a repayment and interest accrual pause and did not incur interest throughout that time. For borrowers who continued to make payments during the pause period, the full payment amount went directly toward the principal balance.
Most federal student loans qualify for these benefits under the CARES Act, including:
- Federal Family Education Loan (FFEL) Program Loans
- Federal Perkins Loans
- Direct Loans
- Certain FFEL loans in default
Private student loans, or those not held by the U.S. Department of Education, were generally considered ineligible for the loan repayment pause or 0% interest rate.
Learn more about the CARES Act hereWhat if I can't make my student loan payments when they resume?
Consider SAVE Plan
In August 2023 Biden-Harris Administration established the SAVE Plan - an income-driven repayment (IDR) plan. Its main purpose is to make it easier for borrowers with federal student loans to make their monthly payments. The SAVE Plan offers most borrowers lower monthly payments than any other IDR plan.
The way this new plan works is simple.
With the SAVE Plan, student loan borrowers no longer have to make monthly payments based on how much they owe. Instead, the plan uses the borrower’s income and household size to determine their monthly payment amount. As long as the borrower makes consistent payments, the remaining loan balance may be forgiven after a certain period.
Here are some of the key benefits of the SAVE Plan:
- It adjusts the income exemption from 150% to 225% of the current federal poverty guideline. This can significantly lower your minimum monthly payment amount.
- Individuals earning $32,800 or less will not have to make monthly payments. The same goes for families of four who earn $67,500 or less (depending on the state of residence).
- Individuals earning $32,800 or less will not have to make monthly payments. The same goes for families of four who earn $67,500 or less (depending on the state of residence).
- This plan will no longer include spousal income for individual borrowers who file a separate tax return. In other words, you might not need to include your spouse on your IDR application.
The SAVE Plan has additional benefits, which will be available in July 2024. These include the following:
- Undergraduate loan payments will be reduced by 50% for qualifying borrowers.
- Borrowers who owe no more than $12,000 in their original loans will have that amount forgiven after ten years of consecutive repayment.
- Consolidating federal student loans are now eligible for student loan forgiveness.
- You might be automatically put into an IDR plan if you’re at least 75 days late on your payments.
How to Sign up for the SAVE Plan
You can sign up for the SAVE Plan online using the application as you would for any income-driven repayment plan. Here are the basic steps:
- Log into your account to begin the application process.
- Review your personal and contact information and update it if needed.
- Look over the four IDR plans and choose the SAVE Repayment Plan. Review the eligibility requirements as well. Most federal student loans are eligible, but not all.
- Input your financial information and your spouse’s (if applicable). Verify your income using one of the three accepted means.
- Read and accept any disclosures and agreements through the U.S. Department of Education.
The application process takes around ten minutes. You can complete the entire application in one sitting, or you can save and return to it later. You can also use the Loan Simulator tool to determine if the SAVE Plan is right for you.
Think About Deferment and Forbearance
If you’re looking for help paying student loans, payment deferral or forbearance may be an option. Both options let you pause your payments temporarily as you get your finances in order. You may be eligible in certain cases, such as if you’re:
- Currently enrolled in an academic program
- On active duty in the military
- In a graduate fellowship program
- Undergoing cancer treatment or a similar health-related emergency
Keep in mind that deferral and forbearance come with their pros and cons. While payments may be paused, interest might still accrue during these periods. You could also delay eligibility for student loan forgiveness programs.