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Navigating the Resumption of Student Loan Payments: A Comprehensive Guide

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Navigating the Resumption of Student Loan Payments: A Comprehensive Guide

Student Loan Payments across the nation are receiving a not-so-welcome surprise in their mailboxes. These are the first bills that most federal student loan borrowers have encountered in over three-and-a-half years. The long-anticipated end of the student loan moratorium has officially arrived, requiring tens of millions of borrowers to recommence payments on their federal student debt.

During the extensive moratorium period, many borrowers have grown accustomed to the absence of monthly loan payments. However, the return of these bills, which are expected to range from $210 to $314 per month for the average borrower, is poised to disrupt the financial plans of many individuals.

According to student loan expert Betsy Mayotte, “That money just isn’t there anymore” for a significant portion of borrowers.

To assist borrowers in transitioning back into repayment, the Biden administration has introduced a new repayment plan and temporarily alleviated the severe consequences of missed payments. Yet, amidst a flurry of rule changes, the introduction of new benefit programs, and prolonged customer service waiting times, many borrowers may still be uncertain about what lies ahead in terms of their student loans this month. Here’s a comprehensive overview of what you need to know:

When are my student loan payments due?

For federal borrowers, the resumption of student loan payments is set for October. The exact due date of your first reinstated bill will be determined by your loan servicer, who should have already been in contact with you. They are mandated to provide at least 21 days’ notice before your due date.

If you graduated during the pandemic, you should have received an email from the Department of Education identifying your loan servicer. If you did not receive this email, you can find the information by logging onto studentaid.gov.

If you know who your loan servicer is but have not received a billing statement (via email or traditional mail), you can access your account with your loan servicer to view your due date and the amount due. Depending on your servicer, you may find this information on the account homepage or within a payments tab.

What if I can’t afford my student loan payment?

If the amount you owe in October seems unmanageable, consider exploring the Biden administration’s new income-driven repayment plan, aptly named Saving on a Valuable Education or SAVE. This plan calculates your monthly payment based on your income and family size, offering more generous terms than its predecessors by safeguarding a greater portion of your income from the formula that determines your monthly obligation. Presently, payments under this plan constitute 10% of your discretionary income, but most borrowers will need to sign up to access it.

If you’ve already investigated income-driven repayment plans and still find the monthly payment too high, there are alternative options available, such as a graduated repayment plan or an extended repayment plan. You can obtain further information through the federal student loan simulator.

What repayment plan am I in?

Upon leaving school and entering repayment, borrowers are automatically placed into the standard repayment plan, involving fixed monthly payments over a 10-year period. To switch to a different plan, including income-driven repayment options, you must enroll with your loan servicer.

If you were already in repayment before the moratorium, you will likely remain in the same repayment plan as of March 2020. The exception is for borrowers enrolled in the Revised Pay as You Earn (REPAYE) income-driven plan, who should be automatically transitioned to the new, more generous SAVE plan.

What happens if I miss a payment?

The Biden administration has instituted a new policy known as an “on-ramp,” which offers leniency for missed payments. Specifically, the Department of Education will not report any missed payments to credit bureaus between now and September 2024. Additionally, missed payments during this period will not lead to your loan being categorized as delinquent or in default, thus mitigating the most severe financial consequences of missed payments.

Nevertheless, officials strongly encourage those with the financial capacity to continue making payments during this period. Interest on student loans, which resumed accruing last month, will continue to accumulate during the on-ramp period, potentially causing balances to swell if regular payments are not made.

Do I have to make payments during the ‘on-ramp’?

In short, yes. All federal student loan borrowers, except those in a period of deferment, must restart making payments. The on-ramp is designed to provide flexibility to borrowers facing financial challenges, but it is not intended to extend the student loan payment pause.

What happens if I stop making student loan payments?

Initially, the primary consequences of missing loan payments include the accrual of unpaid interest and the inability to qualify for loan forgiveness through federal repayment plans.

However, beginning in September 2024, when the on-ramp period concludes, the consequences become more severe. Missed payments will adversely impact your credit score, and your loan could enter delinquency, eventually leading to default after nine months of non-payment. At that point, the Department of Education will intensify its debt collection efforts, which could involve substantial fees, wage garnishment, and even legal action or property repossession.

Betsy Mayotte aptly summarizes the situation, stating, “If you think you can’t afford your payment now, you’re really not gonna be able to afford it if they start garnishing your wages.”

Where can I seek assistance with my student loans?

For most inquiries regarding your loan payments, it is advisable to reach out to your loan servicer.

Additionally, you have the option to file a complaint about your student loan servicer with the Consumer Financial Protection Bureau, a federal watchdog agency. Consider filing a formal complaint if you encounter difficulties contacting your servicer, did not receive proper notice of your loan’s due date, or if the company’s assistance has been unhelpful or misleading.

Navigating the resumption of student loan payments may seem daunting, but being well-informed and exploring the available options can help borrowers manage their obligations effectively.