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Since March 2020, federal student loan payments have been on pause — with no payments required, no interest charged and all collections activities on hold. However, this period of administrative forbearance is set to expire on June 30, 2023 or following the resolution of ongoing forgiveness litigation. Payments will resume 60 days following the end of the payment pause.
The U.S. Department of Education has extended the payment pause multiple times. Previously, the forbearance period was set to end on Aug. 31, but in late August, President Biden announced his mass student loan forgiveness plan and extended the pause an additional four months.
Payments resume 60 days following the end of the pause
Millions of borrowers are currently taking advantage of the administrative forbearance period initiated by the CARES Act in March 2020. Eligible loans include all federally held student loans, plus privately held FFEL loans that are in default.
With the forbearance period set to expire on June 30, 2023 — or when the litigation over loan forgiveness is resolved — borrowers who have not been making payments need to prepare to resume paying their balances. The Department of Education has said that borrowers can expect information and resources about resuming payments leading up to this date.
In the meantime, you can visit the Federal Student Aid website and your loan servicer’s website to ensure that your contact details are up to date so that you’re informed when payments are set to resume.
Why was the student loan payment pause extended?
The payment pause has been extended a number of times, with the most recent extension announced in November 2022. In a press release, the administration made it clear an extension is necessary to prevent those who are eligible for forgiveness from being forced to pay due to ongoing litigation.
“Borrowers can use the additional time to ensure their contact information is up to date with their loan servicers and consider enrolling in electronic debit and income-driven repayment plans to support a smooth transition to repayment,” the press release states.
What to do if you can’t afford student loans after payments resume
A Bankrate survey from April 2022 found that 74 percent of U.S. adults with federal student loans predicted that an extension of the student loan forbearance period would have a positive impact on their finances. With these additional months to prepare for repayment, borrowers have more time to create a plan for their student loans and potentially explore more relief options.
Loan forgiveness options
In addition to the forbearance extension, the Biden administration announced broad student loan forgiveness for federal student loans. Borrowers who make less than $125,000 a year and couples who file their taxes jointly and make less than $250,000 a year are eligible for up to $10,000 in federal loan forgiveness. Current and former Pell Grant recipients under those income thresholds can qualify an additional $10,000. This form of forgiveness is currently on hold due to ongoing litigation.
Borrowers working in certain occupations may also qualify for federal programs that forgive student loan balances after a number of years. For example, the Public Service Loan Forgiveness (PSLF) program – which has loosened some of its eligibility requirements through Oct. 31, 2022 – forgives loans for people in eligible public service jobs after 10 years of payments on an income-driven repayment plan. Teacher Loan Forgiveness, on the other hand, requires five years of employment as a teacher in a high-need area in exchange for up to $17,500 in federal debt discharged.
The current administrative forbearance period is automatically granted to all federal student loan borrowers. However, the federal government also offers general forbearance outside of this emergency relief. You may qualify for up to 12 months of forbearance at a time (up to three years total) if you are unable to pay your loans due to financial difficulties, medical expenses or changes in employment. For more details, you can contact your loan servicer.
Income-driven repayment plans
Income-driven repayment plans set your monthly payment based on a percentage of your discretionary income. Typically you’ll make between 20 and 25 years of eligible payments, and then the rest of your balance will be discharged. If your income is low enough, your payments could drop to $0. If you’re interested in applying, contact your loan servicer to see which plan best suits your needs.
While refinancing federal student loans will eliminate the options listed above, it could be a viable option if you took out your federal loan when interest rates were high and you still have a balance remaining after student loan forgiveness is complete. If you can find a low rate with a private lender, refinancing into a different rate or term once forbearance ends could help you lower your monthly payment.