In this article:

• Understanding the student loan payment pause
• What are the new due dates for student loan payments?
• How to resume making payments
• How to manage student loan debt

Student loan borrowers have had a break from making interest payments for more than three years now. However, the obligation to make monthly payments on those student loans is returning this month. In this article, we discuss the forbearance period, upcoming due dates, and share some valuable pointers on managing debt once student loan payments resume.

Understanding the student loan payment pause

The payment pause for student loans began in March 2020 and was created in an effort to provide relief to Americans during the pandemic. Borrowers that had secured the debt and completed college before the pause were granted some time to skip payments without accruing additional interest on the loans. For those graduating or leaving school after March of 2020, the requirement to make payments on student loan debt had been indefinitely deferred. When announcing the interest-free payment pause, President Donald Trump said interest would be waived “until further notice.”

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As a provision added to the CARES Act of 2020, the Department of Education’s COVID-19 student loan forbearance program started as a response to ease the financial strains of the pandemic. During the interest-free loan forbearance period, borrowers were exempt from having to make payments and all collection efforts were ceased. Now, after nine extensions of the program, interest will resume on college debt in September 2023. The reinforcement of payment due dates comes only after President Joe Biden’s proposal to cancel student debt by granting $20,000 of forgiveness to every borrower was blocked by the U.S. Supreme Court on June 30, 2023.

What are the new due dates for student loan payments?

Loans included in the program included all federally held loans, including unsubsidized federal direct loans, regardless of the financing company servicing them. The payment freeze did not apply to private student loans, non-defaulted HEAL loans, or Federal Perkins Loans that were not held by the U.S. Department of Education. As the repayment plans for student loans are reinstated, borrowers will see their previous loan balances set back to the same amounts as before the freeze. During the pause, some borrowers were eligible to qualify for further loan forgiveness or cancellation programs, so those arrangements will be reflected in the resuming collection balances.

But the question on everyone’s minds remains: When are payments due again?

Beginning on Sept 1, 2023, educational loans will start accruing student loan interest again for all borrowers, including graduate students, not still in the grace period immediately following graduation. The exact due date is determined by the loan terms explained in the original loan documents, but all borrowers will need to start making monthly payments again in October of 2023.

How to resume making payments

Since it has been more than 40 months since student loan payments were last due, many borrowers are finding themselves in need of a refresher about how to begin paying on the loans again. Before another month passes, borrowers can prepare for the end of the payment freeze by identifying and contacting their loan servicer. When the interest-free period for student debt first began, loan servicers that no longer wanted to participate in the Federally mandated student loan program had the option to sell the loans they were currently servicing. For affected borrowers, this will mean when interest and payments resume, they will be making payments and receiving communication from a new financial institution. Borrowers can confirm which company is servicing their loan, by logging onto StudentAid.gov.

Once you’ve identified the financing company servicing your federal student loan, you’ll want to note the following details:

• Payment due date – Even though the payment freeze and interest-free period is ending September 1, 2023, that doesn’t mean payments are due that day. Check your most recent statement or in your online account to find out which day of the month payments are due and what types of repayment options are available.
• Autopay status – Borrowers that were on autopay when the student loan payments and interest were paused during the pandemic should not assume their payment will resume. Since it’s been more than three years, you’ll want to confirm that the form of payment you were using is not expired and that your loan is still with the same servicer.  Some companies will require the autopay agreement to be renewed.  
• Loan terms – Whether the loan servicer on your student debt has changed or not, now is a great time to review your loan terms.  Check the number of payments remaining, annual percentage rates (APR), other financing costs, and for prepayment penalties. It may be a great time to explore refinancing options if the terms, like interest rates, are not as attractive as you recall.

How to manage student loan debt

As the October due dates approach, the Consumer Financial Protection Bureau (CFPB) estimates that 20% of education borrowers will experience financial difficulties resuming payments. For borrowers concerned about working the new payments into their monthly cash flow, the following steps may ease some pressure.

1)      Create a detailed budget – Resuming payments on student debt will affect each borrower’s free cash flow differently. One way to be prepared for increased monthly payments is to make a detailed budget that outlines monthly income and expenses for the year.

 2)      Consider an income-driven repayment plan (IDR)  – If you are concerned about the impact resuming monthly payments will have on your household, consider looking into an IDR plan to make payments more manageable.  Current repayment plans include Saving on a Valuable Education (SAVE), Pay as You Earn (PAYE), Income-based Repayment (IBR), and the Income-contingent Repayment (ICR) plans.  

3)      Consider other financing options – If reinstating your student loan repayment plan doesn’t fit into your current budget, consider exploring other financing options. Speak with a lender about eligibility requirements for a loan consolidation program. There are several types of loans that may be available to help with debt management.

Takeaways

Despite ongoing headlines hinting that there will be further deferment or additional student loan forgiveness, monthly payments are resuming next month. To prepare for the return of student loan payments, reach out to your loan servicer to confirm payment details and the terms of the loan. If you find yourself in the large percentage of people struggling to make payments, consider an income-driven repayment plan or working with a lender on refinancing options.

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