The COVID-19 pandemic pause on federal student loan repayments will end on August 31, 2023. This means millions of federal student loan borrowers will need to restart making payments in October 2023. Here’s what you need to know:
Interest Will Restart Accruing in September 2023
On September 1, 2023, interest will begin accruing again on federal student loans. During the payment pause, interest has been set at 0%. Once the pause ends, interest will start building up based on your loan’s interest rate.
This means that even if your payments don’t resume right away, you may end up owing more money over the long-term if interest starts being charged again. Any unpaid interest that accrues may be added to your loan principal balance through a process called capitalization.
Capitalization can increase your loan amount and your monthly payments. To avoid this, consider making interest-only payments between September and October if you can afford it.
First Payments Will Be Due October 1, 2023
The first payment for most federal student loan borrowers will be due on October 1, 2023. This includes loans like Direct Loans, subsidized and unsubsidized Stafford loans, PLUS loans, and more.
Some Perkins Loans or FFEL-owned loans may have different repayment start dates. Check with your individual loan servicer to find out when your first post-pause payment will be due.
Monthly Payment Amounts Will Vary
Your exact monthly student loan payment amount will depend on factors like:
- Your repayment plan
- Total loan balance
- Interest rate
- Any applicable fees
- Your discretionary income if you’re on an income-driven plan
Generally, expect your payment to be what it was prior to the payment freeze. Again, contact your servicer if you need help determining your specific monthly payment amount.
Evaluate Your Repayment Plan Options
Now is the time to decide if you want to change repayment plans for your federal student loans. You have options like:
- Standard Repayment: Fixed monthly payments over 10 years.
- Graduated Repayment: Payments start low and increase every 2 years.
- Extended Repayment: Fixed or graduated payments over 25 years.
- Income-Driven Repayment: Monthly payments based on income and family size.
Compare the plans and decide if you want to switch by contacting your loan servicer. Doing so before payments restart can help you avoid needing to make up missed payments.
Seek Repayment Assistance If Needed
If you will struggle to afford your monthly payments, act now to seek repayment help. Options may include:
- Income-driven repayment plans
- Deferments or forbearance to pause payments
- Student loan rehabilitation to get out of default
- Forgiveness programs for public servants, etc.
Contact your loan servicer as soon as possible to discuss hardship programs and other repayment assistance options that can make your federal student loans more affordable.
The countdown is on to the end of the extended student loan payment pause. With interest restarting in September and payments resuming in October 2023, now is the time to understand your options and get prepared. Taking action today can help you avoid repayment struggles down the road.
