TAMPA, Fla. — After a three-year pause, federal loan payments are set to restart Sunday.
Millions of people will now have to start paying their student loans again; many haven’t made a payment since March 2020.
“As most people know, all good things must come to an end,” said Betsy Mayotte, President of The Institute of Student Loan Advisors.
Interest on student loans started accruing back on September 1.
Those payments will start to be due on October 1.
If you haven’t already checked to see what your payments are going to be, student loan experts stress now is the time to log into your loan servicer’s website.
“If that payment is not something that’s going to be affordable to you, head on over to the Department of Ed’s website, which is studentaid.gov, and use their loan simulator tool to find a payment plan that works best for both your short and your long-term strategy,” said Mayotte.
“Have your tax returns, know what your income is, and take a look at your budget so that when you speak to your servicer you can speak intellectually about what it is that’s going on financially. Then you can apply for the appropriate programs that are now available,” said Leslie Tayne, financial attorney and debt expert.
The Biden Administration said there will be an “on-ramp” period until September 2024, meaning there won’t be as harsh financial consequences for missing payments for the next 12 months.
However, experts stress you should still be cautious.
“The 'on ramp' period is not an extension of the pause. People are due for payments now, and if they don’t make those payments, they’re going to get delinquency notices in the mail, and they may even get some, what most people would call a collection phone call,” said Mayotte.
During the “on-ramp” period, though, borrowers won’t be reported as being in default to credit agencies if they don’t pay.
“What’s not happening during the on-ramp is it’s not going to be reported as delinquent to your credit report. So normally, federal student loans, if you become 90 days past due or more, they start reporting that to the credit bureaus, so they’re not going to be doing that. Along the same lines, normally, with federal student loans, if you become 270 days past due or more, then they put the loan into default. During this 12-month on-ramp period, that also is not going to happen. But again, interest is still going to accrue. If you don’t make the payment, you’re going to be considered delinquent on your student loan account,” said Mayotte.
If you can’t afford the payment, the number one thing experts recommend is seeing if you qualify for deferment or forbearance to postpone payments altogether.
If you can pay, set up automatic payments to save some money.
“Doing so not only makes sure that you don’t forget the payment, but it also gives you a quarter-point discount in your interest rate,” said Mayotte.
