Student Loan Repayments Are About to Start Up Again in October. Are You Ready?
By Hope Rothenberg on 09/19/2023
Student loan repayments are starting again on October 1st. More than 43 million Americans will need to start making payments again.1 Are you one of them?
These restarting payments come after the three-and-a-half year COVID-19 payment pause put in place in March 2020. The pause was enacted to assist financially struggling borrowers during the pandemic, and it was extended a total of eight times under the Trump and Biden administrations.2
But then, in June, a law officially preventing the pause from being extended again passed. Because of this, student loan interest began to accumulate again on September 1st 2023.3
And in October 2023, payments will restart.
These deadlines are hitting borrowers even harder after a proposal by the Biden administration to cancel up to $20,000 in student loans for millions of borrowers failed.4
With so many borrowers taking a wait-and-see approach for the last few years—and tons of younger borrowers making their first-ever payments coming out of the pandemic—there is a lot that both students and alumni need to refresh on.
“It’s been such a long time since borrowers have had to make payments, and many people have forgotten the options," says Iman Johnson, Assistant Vice President of Student Financial Aid at Rasmussen University. "The university anticipates helping a lot of students and alumni to navigate this and figure out where to start.”
As you prepare to resume making payments, we’ve gathered information from government resources, news organizations and Johnson's insights to help you get started. Here are answers to some of the most pressing questions you may have.
When is my first payment actually due?
Your first payment is due in October 2023, though the exact date varies by borrower. You’ll get your bill citing your payment amount and due date at least 21 days before your deadline, according to Federal Student Aid. By October 1st, many federal student loan borrowers will have already received their bills.5
That said, there are some borrower protections in place. The Biden administration has instituted a 12-month on-ramp period for borrowers reentering payment, beginning on October 1st, 2023 and lasting through September 30th, 2024.4 Borrowers who miss monthly payments during this period will not be considered delinquent, reported to credit bureaus, placed in default or referred to debt collection agencies, as stated by a fact sheet from the White House.
What do I need to know about the interest that’s accumulating again?
For millions of borrowers, interest began accruing again on federal student loans on September 1st, 2023. Depending on what education stage you’re in and the type of loans you have, there may be differences in your interest accumulation.
For example, direct subsidized loans don't accrue interest while you're in college, during the six-month grace period after you leave school or if you are in deferment due to unemployment or economic hardship. On the other hand, interest on direct unsubsidized loans begins accruing immediately after disbursal.
While interest has been paused on these loans since March 2020, there are a few things to look out for. Direct unsubsidized loan interest may have continued to add up even when you were not required to make payments, and it may have been capitalized and added to your principal balance.
The most important thing to consider is this: Though September 1st has already passed, if you set money aside during the pause or have extra income to spare, consider making a lump sum payment as soon as possible. This will help you avoid racking up further interest on payments you can get ahead of before October.6
Which type of loan repayments were paused, and who is reentering repayment?
The payment and interest pause included all federally held student loans, regardless of your student loan servicer. Types of paused student loans include the following:
- Direct federal student loans
- Federal Family Education Loan (FFEL) program loans held by the Department of Education
- Federal Perkins Loans held by the Department of Education
- Defaulted FFEL loans not held by the Department of Education
- Defaulted Health Education Assistance loans (HEAL)
Non-defaulted FFEL loans not held by the Department of Education, Federal Perkins Loans not held by the Department of Education, non-defaulted HEAL loans, and private student loans were not eligible for the pause, and therefore should not be affected by restarting repayments.7
Will any types of federal student loans remain on hold past October?
Due to the law passed in June, there are no federal student loans that will remain paused past October, and there is no possibility of further forbearance extensions related to the pandemic. Regular forbearance options may still exist.
What if I can’t reach my servicer?
The National Association of Student Financial Aid Administrators warns that student loan servicers will likely be overwhelmed with a high volume of inquiries at this time—and borrowers may need to reach out multiple times before getting a hold of someone.
“Have patience,” Johnson says. “The services are trying to hire additional staff, but inevitably there are millions of borrowers out there. Pick times that are off times to call, and even try using the email options. A lot of servicers will have a leave a message and we’ll call you back option, so you don’t have to sit on hold.”
Calling when you have a break at work or when you are commuting might be a good option, according to Johnson, who also recommends utilizing all available contact options to speak with a representative. “When you do reach somebody after you’ve been on hold, have grace with them,” Johnson adds. “They’ve probably just got off the phone with 200 other people before you.”
Should I keep the same plan I enrolled in before the pause?
Some borrowers’ loan servicers may have changed during the student loan payment pause. Get up to speed by finding out who your servicer is, and double check what plan you’re on. It’s possible that your circumstances may have changed over the last three years, and you may want to reassess.
Consider the SAVE plan mentioned above, or consider an Income-Driven Repayment (IDR) Plan. Both are new options that may be effective ways for you to lower your monthly payment balance.
“Look at your budget, and look at your lifestyle,” Johnson says, adding that your initial choice for a repayment option might not be the best fit anymore. “Life doesn’t always go as we planned. Stay in touch with your servicer, and consider any life changes and economic hardship options. Staying in touch with your servicer throughout the entire repayment process is essential.”
I’m a current student, does this impact me?
While current students won’t need to make payments come October, their interest will continue to accrue for the first time in three years. Understanding how this will affect your payments later and getting ahead with a savings plan is a great step for current students to take while they still have extra time.
I’m not enrolled in school this semester, but I do plan to finish my degree. How does this impact me?
"For students who didn’t previously complete their programs, now may be the time to come back to school and get their degree to get their money’s worth,” Johnson says.
If you’ve been waiting for a good time to get back into your education, this payment restart might be just that occasion. When you return to your program, the required repayments on your federal loans will pause again.
I’m a prospective student. Does this impact me?
If you don’t have a student loan, the payments resuming will not impact you directly. But they can serve as a useful reminder to make “figuring out and documenting my financial aid details” part of your checklist when enrolling. Be sure to ask questions of your university’s financial aid office, and write the answers down somewhere so you can reference them again if needed.
“Prospective students often don’t ask questions at all,” Johnson says. “They assume what they think is right, and then when we reach out with different information they’re frustrated. So ask questions. If you feel it’s a stupid question, ask it anyways. If you’re wondering it, you need to get the answer.”
I can’t make my monthly payments, what should I do?
If you’re unable to make the repayments, the one year “on-ramp” grace period mentioned above can provide some time to figure out a plan. The most important thing to do is not skip the payments entirely, according to the Inceptia Great Advice for Repayment Guide. Defaulting can set off a slew of negative financial consequences.
There are some other options. If you had student loans in default before the pause, you may want to enroll in Fresh Start, a one-time temporary government program from the U.S. Department of Education that offers special benefits for borrowers with defaulted federal student loans. This program can allow borrowers to get their student loans out of default, build their credit scores and sign up for income driven repayment plans.
Instead of skipping payments, be sure to contact your lender or loan servicer and request information about any potential relief options. There may be opportunities to temporarily reduce rates, payments or enter deferment or forbearance.
Some non-profit or legal organizations may offer help as you navigate repayments and federal student loan debt, but watch out for scams and anyone offering student loan forgiveness—only the federal government can forgive your student loans./p>
Apply for the SAVE plan or an IDR plan that caps your monthly dues at a percentage of your income. Depending on your income, either of these options may lower your federal student loan payments to as little as $0 a month.
Another option? If you have an employer who’s willing to help its employees with student debt, speak to your human resources department about ways that the company can match your student loan payments without any negative tax effects.
Are there any ways to apply for more repayment time?
Though the mass repayment pause is ending, you can look into individual deferment and forbearance options to temporarily stop interest from accruing on your loans. If you’re unable to contact your servicer or get the information you need about these options, you may want to consider connecting with a credit counselor.
Similarly, Federal Student Aid Counseling may be helpful if you have yet to complete it.
How can I make extra money in the meantime?
If you are having trouble entering the career you want and are looking to set aside extra income for renewed student loan bills, consider applying for an internship to break into your field. It may seem counterintuitive, but investing a few months in an internship that doesn’t pay much but gets you the experience you need to stand out for a good job will probably be worth it in the long run.
Current students looking to pay more on their principal and avoid extra interest accumulation should look into a Federal Work Study Program.
“Our Work Study Program offers student ambassador positions, peer tutor positions, and more,” Johnson says. “It’s a great opportunity to learn people skills and soft skills in an office environment that you might not otherwise learn in school.”
What should I do before student loan payments resume?
In the days before payments start again, make sure you understand what you need to pay, how you need to pay it and what your options might be. “Do your research,” Johnson says. “Figure out who is your lender, and who is your servicer.” It may have been awhile since you dug into that paperwork, and it’s not anyone’s idea of a good time—but getting everything sorted out will take the pressure off.
In addition to reaching out to your servicer with questions as soon as you can, you’ll also need to reauthorize automatic payments, even if you authorized the withdrawals before the pause.4
After that, Johnson advises looking into your repayment options. “There are a lot more options for repayment plans than there used to be, and a lot of the work the Biden administration has been doing is around lowering monthly payments. Look into the SAVE plan, and go to that studentaid.gov website.”
“And call—don’t be scared to have conversations, to ask questions, and to do your research.”
Rasmussen students can contact financial aid and speak to a student loan manager for advice on how to handle their loan repayments. Contact our Student Loan Management team at: 855-986-2255 or [email protected].
1O. Rodriguez (2023) U.S. Student loan debt statistics you should know in 2023, Credit.com. [accessed 9/19/23] https://www.credit.com/blog/student-loan-debt-statistics/#:~:text=At%20the%20end%20of%202022,%2C%20you're%20not%20alone.
2Casey Kuhn, Student loan payments are restarting. Here’s what to know, (updated Sep.8, 2023, 1:00PM) [accessed 9/19/23] https://www.pbs.org/newshour/nation/student-loan-repayments-are-starting-again-heres-what-you-need-to-know.
3Katie Lobosco, What the debt ceiling deal could mean for student loan borrowers,(updated May.31, 2023, 11:39AM) [accessed 9/19/23] https://www.cnn.com/2023/06/30/politics/school-loan-payments-due-october/index.html
4Katie Lobosco, Here’s when your student loan payments will start again, (updated Jun.30, 2023, 5:32PM) [accessed 9/19/23] https://www.cnn.com/2023/06/30/politics/school-loan-payments-due-october/index.html
5Prepare for Student Loan Payments To Restart, [accessed 9/19/23] https://studentaid.gov/manage-loans/repayment/prepare-payments-restart
6Eliza Haverstock, Supreme Court Strikes Down Student Debt Cancellation. Now What?, (originally published on Jun.30, 2023 on NerdWallet), [accessed 9/19/23] https://publications.inceptia.org/view/36129960/4/
7Peter Butler, Dan Avery, Interest on Student Loans Is Restarting. Here’s What Borrowers Need to Know, (Sep.1, 2023) [accessed 9/19/23] https://www.cnet.com/personal-finance/loans/student-loan-payments-start-again-soon-how-to-prepare/
