Ready for some important news? If you’re a federal student loan borrower, those monthly loan payments are about to make a comeback after a pretty long hiatus – more than three years, to be exact.
So, what’s the scoop? The student loan moratorium, which has been giving most of the country’s 43 million borrowers a payment and interest break since March 2020, is finally winding down. It’s been quite the rollercoaster, with former President Donald Trump and current President Joe Biden extending it eight times! But here’s the deal, it can’t be extended unilaterally again, thanks to a recently passed law. If it’s to continue, Congress will have to give the thumbs up.
Here’s a breakdown of what’s coming next:
Interest is Back:
– As of September 1, 2023, interest on federal student loans has resumed.
Loan Repayments Return in October:
– In October, you’ll need to start making student loan payments again.
– The exact due date may vary depending on your loan servicer, but they’re required to provide you with at least 21 days’ notice.
Transition Period:
– From October 1, 2023, to September 30, 2024, the Education Department has implemented a 12-month “on-ramp” period.
– During this time, missing a payment won’t lead to default or delinquency on your loans.
– Your credit score won’t be affected as they won’t report missed payments to credit bureaus or debt collectors.
Introducing the SAVE Plan:
– The Biden administration has introduced the Saving on a Valuable Education (SAVE) plan.
– This plan helps you pay what you can afford by basing monthly payments on your “discretionary income” (income after covering necessities).
– Starting in July 2024, undergraduate loan payments will drop from 10% to just 5% of your discretionary income.
Expect Servicer Challenges:
– Loan servicers may face challenges as they handle payments for millions of borrowers transitioning back into repayment.
– This situation can be especially complex for those who have never made a payment before.
Remember, we’re here to help you navigate these changes smoothly!
