Returning to Repayment 2023

Returning to Repayment 2023

Returning to Repayment – What’s Ahead for Student Loan Borrowers?

The freeze on student loan payments expires in September. In place since March 2020, the start of the pandemic, Federal Student Loan borrowers have been exempted from making monthly payments and saw their interest rates drop to zero during this time.

Beginning on September 1, 2023, interest on all Federal student loans, Direct Student Loans, Direct PLUS, and the older FFELP and Parent Loans will begin to accrue interest. Monthly repayments begin again on October 2023, based on arrangements made with the borrower’s loan servicer.

What next steps should borrowers take to prepare for repayment?

  • Eye on Washington! The Administration appears to be working quickly to create a new program to provide debt relief and support to student loan borrowers. Initial details were released on 7/5/2023, revealing new repayment and forgiven options. If approved, the program will take a year before it begins.
  • In the meantime, borrowers of Federal Direct Student Loans, Federal PLUS Loans, and the older FFELP should visit studentaid.gov, check their loan account for accuracy and payment details, and double-check the name and location of their loan servicer. Since the freeze, many borrowers many have seen their loan accounts moved to a new loan servicer.
  • After reviewing their loan account, borrowers should examine their ability to restart their loan payment. If unable to resume making their payment, borrowers should investigate eligibility for one of the many repayment-sensitive options, including:
  • Graduated loan payments
  • Income-Driven (IDR) or Income Contingent (ICD)
  • Temporary interest-only payments.
  • Borrowers can log in to their account at studentaid.gov or speak with their loan servicer to determine their options.

Borrowers on a qualified Public Services Loan Forgiveness Program (PSLF) should contact their servicer to restart their loan payment and verify the official completion date (which may have already occurred.

Borrowers may be eligible for one-time Payment Count Adjustments towards Income-Driven Repayment and Public Service Loan Forgiveness Program repayment timelines.

Other Things to Consider

Taking advantage of private education loan refinancing can provide relief from high-interest rates or the need to lower monthly payments. But, borrowers should “check their rate” and get pre-qualified. Comparing rates and benefits is essential before refinancing one’s federal loans to a private education loan program. Switching federal loans to a private relationship will eliminate all future government benefits. Borrowers can refinance current private loans while leaving their federal loans alone. Contact an established education loan refinancing lender for a rate quote.

New employer-employee programs are coming online every day. These programs allow employers to contribute to an employee’s student loan payment through various tax-free benefits typically reserved for advanced education credentials. Resources can be redirected to an employee’s student loan repayment and college planning needs using these and other critical financial resources.  Programs can be instrumental to an organization’s efforts to hire and retain talent. Consult with your HR Department to determine the benefits your organization offers.

Always pay off high-interest-rate consumer debt first, including credit cards and loans. Student loan consolidation and private education loan refinancing can be an option.

Consult with your financial planner before significantly changing your retirement and financial profile. Beware of tax implications.

We will be monitoring developments from Washington and across the higher education landscape. Stay Connected to stay up-to-date.

Tom O’Hare is the founder of Get College Going, author of “Pivotal College Planning Workbook”, and a partner of Pivotal College Years. As an education advisor, Tom works to guide parents, students, and employers through the complexity of planning and funding education pathways after high school. He

frequently writes about higher education access, completion, and affordability.