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FINANCE

When will student loan payments restart?

The Supreme Court has thrown out Biden’s student loan forgiveness plan. Borrowers will need to prepare as the moratorium on repayments will expire soon.

Update:
Official dates for student loan repayments to restart
BRIAN SNYDERREUTERS

It’s been three-plus years since the student loan moratorium was first authorized. Repayments and interest accruing on outstanding federal student loan debts have been on pause since March 2020. Originally begun under the Trump administration, it has been extended eight times over the past three years, most recently by President Biden in November 2022.

The latest decision to keep the freeze going was taken when his administration’s broad student loan forgiveness program was put on hold while the courts ruled on its constitutionality. As part of the deal the White House and House Republican leadership reached on raising the debt ceiling, there will not be any more extensions. Borrowers will have to prepare to restart payments now that the Supreme Court has deemed that Biden did not have the authority for such far-reaching debt relief.

Borrowers will be notified “well before payments restart” but they can expect that to be in October 2023 the Federal Student Aid website says. However, interest will start accruing again beginning 1 September 2023.

When will student loan payments restart?

Borrowers are not getting anymore extensions of the moratorium due to the debt ceiling deal reached between the White House and Republican leadership in the House of Representatives. As the Federal Student Aid website states: “Congress recently passed a law preventing further extensions of the payment pause.”

As part of the deal, President Biden managed to avoid throwing out his broad-based federal student loan forgiveness program that was then awaiting a Supreme Court ruling but set a fixed expiration to the pause on payments and interest.

What should student loan borrowers do to prepare for loan repayments?

There may be some confusion going forward over what borrowers may owe after the legal limbo the debt forgiveness program went through. That in turn has raised concerns that when repayments start again many could be at risk of defaulting. With the SCOTUS decision now out, the Department of Education will be able to definitively tell borrowers how much they owe and what their monthly payments will be.

In the meantime, you can get a head start to being preparing. Check what your monthly payments were prior to the moratorium to get an idea. Better yet, take the initiative and contact your student loan servicer to find out what you could expect to have to pay. As well, 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.

Also look into other forms of having your student loans forgiven. The Department of Education is reviewing rules to reduce the amount of time that it takes for people on Income Driven Repayment plans to have their outstanding balance canceled. As well, the Biden administration is working to allow more people to qualify for the Public Service Loan Forgiveness (PSLF) program. Under this program those qualified could see their debt erased after ten years of qualified payments.

Lastly, 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 October.