What student loan borrowers should know as payments resume

People with federally managed student loans, who haven’t had to make payments for three years, are preparing to see those bills come due again in October. Interest starts accruing September 1.

Read on for steps borrowers can take now to prepare.

PANDEMIC PAUSE ENDS

A freeze on federal student loan payments and interest that began in March of 2020, and extended several times since, ends in October.

To prepare, Kimberly Palmer, a personal finance expert with NerdWallet, said borrowers should confirm what they owe and where payments should be sent.

“The first step for anyone, because it has been three and a half years for a lot of people making these payments, is that you want to just do a quick check-in on your own loan and see how much it is, what the balance is, what the interest rate interest rate is,” Palmer said.

Confirm your loan servicer by logging into your dashboard at studentaid.gov. Borrowers can also call the Federal Student Aid Information Center at 1-800-433-3243.

“I think it's really important for people to kind of check in on what's going on,” said Ted Rossman, a senior industry analyst at Bankrate. “A lot of people's loan servicer changed. A bunch of companies left the market over the past few years."

Confirm the borrower’s contact information is current. Borrowers who were enrolled in autopay, which offers an interest rate discount, may have to enroll again.

Loan servicers must send a bill at least 21 days before it is due.

REPAYMENT PLAN OPTIONS

If a borrower is not able to pay, they can ask about hardship options and if they qualify for an income-driven repayment plan. There are four offered by the federal government, including the newest one called Saving on Valuable Education or SAVE.

Depending on the borrower’s income, some may see monthly payments lowered to zero. According to an example listed on studentaid.gov’s website, a borrower making $32,800 or less or a family of four that earns $67,500 or less may not owe monthly loan payments.

“What it means is if you're a single person making less than about $33,000 a year, you may not have to make any payments at all. If you're a family of four, that cutoff is right around $68,000,” Rossman said.

For those who don’t make payments that are due, the Office of Federal Student Aid writes there is a grace period or “on-ramp” period through September 30, 2024, when it won’t report delinquencies to credit reporting agencies. It also says, “We won’t report you as delinquent during the on-ramp period, but we don’t control how credit scoring companies factor in missed or delayed payments.”

“You definitely want to consider if that really is a good choice for you or if that will just create greater financial stress in a few months’ time,” Palmer said.

WATCH OUT FOR FAKE RELIEF OFFERS

The Department of Education explains borrowers should be on alert for scams and phony offers of loan forgiveness. It says don’t pay anyone who contacts you with promises of debt relief or loan forgiveness and don’t share your FSA ID or account information.  

It says borrowers don’t have to pay for help with federal student loans. Loan servicers can help adjust repayment plans or consolidate multiple federal student loans.

You can find a list of loan servicers the Department of Education works with here.

STUDENTS IN TEXAS WATCHING DEVELOPMENTS

In Texas, estimates like this shown by the Student Loan Debt by State and this shown by the How Much Federal Student Loan Borrowers Owe in Each State sites show the average student has around $33,000 dollars in federal student loan debt.

“A lot can happen between now and two years when I graduate,” said Kevin Roberts, who is starting his graduate studies at the LBJ School of Public Affairs at the University of Texas at Austin.

Working in student government and getting involved with the Student Debt Crisis Center, Roberts said he’s keeping a close eye on the student loan debt landscape as he works toward his master’s degree.

“Being a part of that space, I'd recognize that there were a lot that this was an issue for a lot of students, while maybe not presently an issue, but was going to be an issue after they graduate.”

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