Resumption of Federal Student Loan Payments: Essential Information You Need to Know

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Federal student loan repayments are set to recommence this month, following an unprecedented pause of over three years due to the COVID-19 pandemic.

A payment notice detailing your monthly obligations should arrive a minimum of 21 days before the due date. Most borrowers will have already received this invoice. If you haven’t, please check your loan servicer’s account, as interest resumed accruing in September.

If you hold student loans and haven’t remitted any payments over the past three years, there’s no need for undue concern. Here are expert guidelines:

Where to Begin?

The initial step is to sign into your StudentAid.gov account to identify your current loan servicer. According to Amy Czulada, Outreach and Advocacy Manager at the Student Borrower Protection Center, many servicers have changed amid the pandemic. It’s possible that your servicer now is different from the one you had in March 2020.

After determining your servicer, log into their account portal to review details such as your loan balance, monthly payment, and interest rate. Czulada also advises examining the type of student loan you possess, as it will indicate which income-driven repayment options you may be eligible for.

Ensure that your personal details are updated in your account to receive crucial communications.

Determining Your Monthly Payments

You can ascertain the amount of your monthly payment on your loan servicer’s account portal. If you’re unsure about who your loan servicer is, this information can be obtained through your StudentAid.gov account.

What if the Payments Are Exorbitant?

If you’re concerned about affording the upcoming payments, multiple avenues are available to you.

Earlier this summer, President Joe Biden introduced a 12-month grace period aimed at aiding borrowers experiencing difficulties upon resumption of payments. It is advisable to continue making payments during this period; however, failure to do so will not result in a default or negatively impact your credit score. Nevertheless, interest will continue to accumulate.

Betsy Mayotte, President of The Institute of Student Loan Advisors, suggests that you explore eligibility for income-driven repayment plans. Tools available at StudentAid.gov and TISLA’s website can assist in identifying a suitable plan, providing estimates of your monthly payments and long-term costs.

Understanding Income-Driven Repayment Plans

Income-driven repayment plans are designed to make your monthly loan payments affordable based on your income and household size. They consider various expenses and are available for most federal student loans.

Your payments under these plans are often a percentage of your discretionary income. For low-income borrowers, the payment could even be zero dollars.

The Biden administration recently introduced a new income-driven plan known as the SAVE plan, which offers exceptionally generous terms. Borrowers won’t accrue additional interest as long as they make consistent payments. However, legal challenges could potentially jeopardize this plan, similar to those faced by Biden’s mass loan cancellation proposal.

Additional Debt-Relief Programs

For those employed by government agencies or nonprofits, the Public Service Loan Forgiveness program offers loan cancellation after ten years of regular payments. Income-driven plans may also offer debt cancellation after 20 to 25 years.

Victims of fraudulent activities by for-profit colleges may be eligible for borrower defense, leading to loan relief.

Cost-Reduction Strategies

Enrolling in automatic payments could qualify you for a 0.25% reduction in your interest rate.

How to Enable Automatic Payments

Automatic payments can be set up via your loan servicer’s online portal. Amy Czulada states that borrowers previously enrolled must re-enroll.

Additional Cautions

Be vigilant against scams. No fees should be paid for loan assistance or program applications. According to Czulada, the Department of Education will not make unsolicited phone calls. Therefore, any request for immediate payment over the phone should be treated as a potential scam. Official email addresses and careful scrutiny of advertisements can offer additional protection against scams.

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This informative and educational report is supported by the Charles Schwab Foundation, an independent entity separate from Charles Schwab and Co. Inc. The AP holds sole responsibility for the journalistic integrity of this article.

Frequently Asked Questions (FAQs) about Federal Student Loan Payments

More about Federal Student Loan Payments

• Federal Student Aid
• Student Borrower Protection Center
• The Institute of Student Loan Advisors (TISLA)
• Public Service Loan Forgiveness Program
• Borrower Defense to Repayment
• Department of Education
• Charles Schwab Foundation
• Associated Press (AP)
• Income-Driven Repayment Plans
• Understanding Student Loan Scams