If you had high hopes for President Joe Biden’s student loan forgiveness plan or for the federal student loans payment pause during the Covid-19 pandemic to be extended, you probably feel like nothing is going your way now.
Starting from March 2020, interest will resume accumulating after being set at 0%, and federal student loan repayments will once more be required later this year. The previous endeavor for loan forgiveness is expected to face a similar outcome as previous instances of loan forgiveness that the administration plans to implement using the Higher Education Act of 1965.
Are you interested in writing down all the key dates on your calendar as you begin to make payments on your federal student loan? Do you want to know exactly what is expected to happen and when you need to be ready to start repaying your student loan debt later this year?
August 1, 2023: Application for SAVE Plan Commences
Before the end of this year, you should know that you have the option to look into income-driven repayment plans that allow you to pay a percentage of your discretionary income for the remaining balances of your forgiven loans for 25 to 20 years, or you could always move your loans to a longer repayment plan to get a lower monthly payment.
You can also sign up for the new income-driven repayment program called SAVE, which was announced by President Biden. According to a press release from the White House in June 2023, the SAVE plan will cut monthly payments in half for borrowers. More people will qualify for a monthly payment of $0 on their federal student loans, saving borrowers at least $1,000 per year while others will save.
In lieu of a two-decade period, individuals enrolled in the SAVE program with federal student loans amounting to $12,000 or less can also qualify for loan forgiveness within a decade. Furthermore, if their monthly repayment amount is lower than the monthly interest, borrowers who opt for the SAVE plan will also prevent the accumulation of unpaid interest on their loan amounts, thereby ensuring that their balances do not increase over time.
Because SAVE is an upgrade to the existing income-driven REPAYE plan, people who are already paying their loans will automatically be moved to the REPAYE plan when it becomes available.
The U.S. Department of Education says you should sign up for another income-driven repayment plan, such as the SAVE plan, as soon as possible.
Urgent: Renew Your Income for Income-Driven Plans
Recertifying your income annually is typically required, and the Department of Education states that you will be given a six-month timeframe to complete this task if you were enrolled in an income-based repayment plan prior to the payment suspension that commenced in March 2020.
If possible, it is advisable to complete the task “prior to August” and ensure that you obtain the appropriate monthly payment considering your present earnings and the size of your household by taking early action. This course of action is also suggested.
Urgent: Enroll in Automatic Payment
Enroll yourself in the offer provided by many private lenders and federal student loans, which offers a 0.25% discount for autopay. It can help you save on the interest of your student loan in the long run and make a difference, although it’s important to note that this discount is not a significant one.
According to Studentaid.Gov, in order to be eligible for the discount on your initial monthly payment, it is necessary to sign up for automatic payment. Additionally, if you had previously been utilizing automatic payment prior to the payment suspension that commenced in March 2020, you will need to enroll again. The deadline for this re-enrollment is “prior to August”.
It is extremely important: If you were previously registered for automatic payment before the pandemic, that information has been deleted and you will have to register again.
According to Studentaid.Gov, interest starts accumulating on federal student loans on September 1, 2023, following a period of being fixed at 0% for over three years.
Borrowers who consolidated their federal loans in the last few years through Loan Consolidation Direct will see a new rate that uses the average weighted rates across all the loans they consolidated. However, most borrowers will see their rates revert to whatever they were before the Covid-19 payment pause began. Since federal student loans have fixed interest rates, the loan rates will remain constant for the life of the loan.
October 2023: Federal Student Loan Repayments Commence Again
According to studentaid.Gov, after it is sent, you will have a minimum of 21 days prior to your deadline, and you can anticipate receiving your invoice in either late September or early October. The specific due dates for your payments may differ depending on your loan administrator, but payments for federal student loans will recommence in October.
If you want to ensure that you receive timely updates about your federal student loan payments, it is a good idea to contact the website service provider and StudentAid.Gov to update your information.
September 30, 2024: When Unsettled Student Loans Turn Delinquent
The Biden administration has also announced a “on-ramp” period of 12 months, starting from October 2023 to September 2024, to give some breathing room for borrowers who are figuring out how to afford their monthly student loan payments during this last period from October 2023 to September 2024.
Borrowers should note that they do not need to take any action to qualify for federal student loans during this period, as everyone is automatically eligible. It is important to mention that loans that remain unpaid during this time will not be referred to debt collection agencies, reported to credit bureaus, or considered as delinquent, according to a press release from the White House.
The payment hiatus concludes after twelve months, marking the conclusion of the Fresh Start initiative for federal student loans in arrears, roughly coinciding with the duration of the on-ramp phase.