Newsletter 2023 V3 Article - Federal Student Loan Payments
Most federal student loan payments and interest have been suspended since March 2020. After numerous extensions and the introduction of a federal student loan forgiveness act that was blocked by the Supreme Court as of June 30, 2023, student loan interest will resume on September 1, 2023, and payments will resume in October. What does this mean for federal student loan borrowers, and what steps do you need to take to prepare for repayment?
Below we outline several key items to help ease the stress of restarting your federal student loan payments. For the most up-to-date information, visit the Federal Student Aid website.
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Log in to your student loan servicer’s account to review your loan details and your contact information
Servicers will notify borrowers before payments resume, so it’s important to make sure your contact information—including email address, mailing address, and phone number—is up-to-date. Not sure who your servicer is? Visit your Federal Student Aid dashboard at studentaid.gov and log in to view your loan details. You can also contact the Federal Student Aid Information Center at (800) 433-3243. Keep in mind that servicers changed for about 2 million borrowers during the time period payments were paused, so be sure to verify who currently services your loan(s).
Watch for correspondence about exactly when your payments will resume
While payments are slated to resume in October, not all borrowers will need to restart their payments at exactly the same time. There are many factors that affect when your first loan payment will be due, and your loan servicer will communicate those details to you.
Review communications about your loans carefully to avoid scams
Unfortunately, many scammers take advantage of borrowers in times like these. Do not provide any personal information via phone or email unless you are certain you are communicating with your loan servicer. If you’re unsure, look up the contact information on your servicer’s website, and reach out to them directly. This also goes for promises of student loan forgiveness. Remember: if an offer seems too good to be true, it probably is.
Prepare your finances for repayment
If you have not been making payments during the pause, you will need to incorporate student loan payments back into your budget. Once you know when your payments will resume and how much your payments will be, review your expenses and plan accordingly. Studentaid.gov provides a loan simulator where you can learn more about repaying your federal student loans, or what to do if you cannot afford your payment. You can also contact your servicer to discuss what options may be available, including income-based repayment plans.
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Don’t wait until the last minute
Roughly 44 million borrowers will be resuming payments this fall, and there could be long waits for personal assistance. Take care of as much as possible, as soon as possible to set yourself up for a smooth transition—especially if you believe you will need to change repayment plans, or if you were in forbearance on a loan prior to the pause.
Consider student loan consolidation or private loan refinance
Once you have all the pieces in place, you may also want to consider Federal Student Loan Consolidation or private student loan refinance* to simplify your loan repayment. Both options could potentially lower your monthly payment, and private student loan refinance could help you pay back your loans sooner to save on interest over time.
New income-driven repayment plan: SAVE
One way to lessen the stress of federal student loan payments is to enroll in an income-driven repayment plan. Income-driven repayment (IDR) plans calculate monthly student loan payment amounts based on your income and family size. The Department of Education has introduced a new IDR plan called the “Saving on a Valuable Education (SAVE) Plan” that will replace the existing REPAYE Plan. This new plan provides the lowest monthly payments of any IDR plan and may significantly lower or even eliminate required monthly payments for some borrowers. Additional SAVE Plan benefits will go into effect in 2024.
What is “Plan B”?
President Biden has recently announced the White House will now turn to the Higher Education Act (HEA) of 1965 in order to have federal student loans erased. This act allows the Education Secretary the ability to “compromise, waive, or release loans under certain circumstances.” Details of this plan are still in the works, but the Department of Education states that it will design the parameters of the program with public participation over the coming months
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*Federal student loans may qualify for payment and interest rate benefits that private student loans do not. Carefully consider your options before refinancing federal student loans, as they will no longer qualify for current and future federal benefits once refinanced with a private lender. For more information, visit studentaid.gov or contact your federal student loan servicer