This comes after a pause on payments and interest accumulation that began in March 2020 due to the pandemic.
The Department of Education has announced that federal student loan borrowers will be required to resume their monthly loan payments starting in October
The exact date for resuming payments had been uncertain until now. According to the Biden administration, the pause on student loan payments would end either 60 days after June 30 or 60 days after a ruling from the Supreme Court regarding a separate student loan forgiveness program, whichever comes first. However, a law passed in early June regarding the debt ceiling prevents the pause from being extended further. This pause has been extended eight times under both the Biden and Trump administrations.
Starting from September 1, 2023, student loan interest will resume, and payments will be due in October. The Department of Education will notify borrowers well in advance of the restart of payments. It is important for borrowers to note that not all bill statements will be due at the same time each month.
The Department of Education plans to communicate directly with borrowers and increase its communication with student loan servicers to facilitate a smooth transition to repayment. Experts advise borrowers to contact their loan servicer as soon as possible with any questions, particularly if they are interested in enrolling in an income-driven repayment plan, which can lower monthly payments but requires additional paperwork.
Many borrowers may face challenges when it comes to resuming payments, as indicated by a recent study by the Consumer Financial Protection Bureau, which found that more student loan borrowers are currently behind on other bills compared to before the pandemic.
Some borrowers may have different loan servicers since their last payment, further adding to potential confusion
The initial pause on student loan payments was implemented to assist financially struggling borrowers during the pandemic. While the economy has largely recovered from pandemic-related disruptions in terms of employment, certain sectors still face challenges, such as recent major layoffs in companies like Disney and Amazon. Inflation, although cooling down, remains high after reaching a 40-year peak last year. Meanwhile, the fate of the Biden administration’s student loan forgiveness program awaits a decision from the Supreme Court, expected in late June or early July.