Following the declaration of the global pandemic in March of 2020, the Trump administration instituted a federal student loan moratorium that resulted in an immediate pause on student loan payments and interest accrual for federal student loans. Furthermore, federal loan servicers were prohibited from taking action on borrowers in default before the start of the pandemic.
In August 2022, President Biden announced that the U.S. government would cancel up to $20,000 of debt for anyone who had received a Pell Grant to attend college, and up to $10,000 for the vast majority of remaining borrowers. However, in one of the most anticipated decisions of its current term, in June 2023 the U.S. Supreme Court has struck down President Biden’s sweeping plan to discharge some or all federal student loan debt for tens of millions of Americans.
According to an Education Department spokesperson, student loan interest will resume on September 1, 2023, and payments will be due starting in October 2023. When the time to start repaying your loans gets closer, you’ll want to contact your loan servicer to find out exactly when payments will start, how much they will be, and when they are due.
Once your repayment period begins, you should strive to pay as much as you can each month, with the goal of paying off the loan faster and reducing the amount on interest you would have paid. You’ll also want to make payments on time because late or missed payments will show up on your credit report and can lower your credit rating, which can make it harder to get things such as a credit card, a mortgage or other loans.
With student loans, it’s not uncommon to be dealing with a variety of lending institutions. With that in mind, it might make sense to consolidate or refinance your loans so you’ll only be making a single payment each month. If you have a federal student loan, ask your servicer about consolidation options, and if you have private loans check with your lender to see if refinancing could get you a lower interest rate or a longer repayment term.
Your monthly payment will be based on the amount you owe, your interest rate and the length of the repayment plan. While it’s important to always make at least the minimum payment, experts recommend that you try to pay more whenever you can. This will help retire your loans faster, reducing the amount of interest charges you’ll pay, possibly saving you thousands of dollars.
Keep in mind that student loan interest starts accruing once the loan is started (which will likely be before the repayment period starts). With federal student loans, the government will pay that interest while you are in school. With a private loan, you are responsible for all interest costs from the time the loan is issued so you might want to make interest-only payments while still attending classes.
To help make certain that you won’t miss a payment, you should consider having the money automatically withdrawn from your bank account and you should factor these payments into your monthly budget along with your other spending obligations, in order to ensure you have enough money to cover all your needs.
To learn more about federal student loans and your repayment options, find the name and contact information about your loan servicer, and research other details about your loan, visit studentaid.gov.
The big lesson to be learned with student loans is to find out who you need to repay, how much you owe, when the payments start, how long it’s going to take to pay them off, and then to always make your payments on time.