FINANCE
Do you need to start paying off your student loans again in September 2023?
The last moratorium extension, which has been consistently renewed since the start of the covid-19 pandemic, is scheduled to conclude by the end of August.
President Joe Biden has failed to get one of his flagship election policies put into law: student debt cancellation. Originally, student debt was to be cancelled, all $1.7 trillion of it. Then it was watered down to $20,000 per student, but now it is nothing. The ruling from the Supreme Court deemed the plan illegal and it has been scrapped.
With nearly every one of the president’s major policies tossed by the wayside, be it the ‘green new deal’ or secure abortion rights on the federal level, it remains to be seen how these failures will affect the vote in next year’s presidential election.
Something that will be intentionally ending around the same time is the student loan payment moratorium. Since the covid-19 pandemic students have not had interest accrue on their student debt but this is soon to change.
The debt moratorium in more detail
Initially set to end on 30 September, 2020, borrowers were not required to make monthly loan payments, and interest on their federal student loans was temporarily set to 0%.
Additionally, the suspension of payments during this period did not result in negative consequences such as penalties or late fees, and any non-payment was not reported to credit bureaus.
The student loan moratorium only applied to federal student loans owned by the Department of Education.
The moratorium will end 60 days after 30 June. Federal student loan repayments would resume on 30 August.
Preparing for the resumption of student debt payments
If you aren’t already budgeting, then putting money aside for what you would be paying with the payment resumption. This will be crucial so you are not caught out with suddenly having to cut spending on things you cannot afford to come September.
Contacting your loan servicer to check details are up to date is also important. You can find out your loan servicer by logging into StudentAid.gov or calling the Federal Student Aid Information Center at 1-800-433-3243.
Federal student loans have more flexible repayment plans such as income-driven repayment (IDR) plans adjust your monthly payments based on your income and family size, making them more affordable. The government offers four income-driven repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR)
Alternatives to student loan forgiveness
Student-loan borrowers can take advantage of Public Service Loan Forgiveness (PSLF) programme. This programme forgives the remaining balance on your federal Direct Loans after you have made 120 qualifying payments while working full-time for a qualifying employer in public service or non-profit organisations. This provides the possibility for a borrower to have their debt cancelled in 10 to 20 years, respectively.