5 Key Student Loan Repayment and Forgiveness Dates as Payments Resume

The student loan pause is coming to an end for millions of borrowers. For the first time in over 40 months, borrowers will have to resume repayment on their federal student loans, which have had billing and interest suspended under the Covid-19 forbearance.

While many borrowers were hoping for another extension of the student loan pause – particularly in light of last month’s Supreme Court ruling striking down President Biden’s student loan forgiveness plan – that does not look likely. Biden’s hands are tied due to federal spending legislation he signed in June to raise the debt ceiling. That legislation codifies the end of the student loan pause and prevents him from issuing another extension, outside of a new national emergency. Administration officials have made clear that this time, the end of the student loan pause is real.

To ease the transition back into repayment and to blunt the impact of last month’s Supreme Court decision, the administration is rolling out a number of programs, flexibilities, and new debt relief to borrowers. But keeping track of these plans and the associated key dates can be daunting.

Here's a breakdown. 

Student loan pause ends in August, but student loan forgiveness begins

The student loan pause officially ends at the end of August. Borrowers with government-held federal student loans – including all Direct loan borrowers, as well as borrowers with government-held FFEL loans – have not had to make payments on their loans since March 2020. Interest has also been set to zero. The moratorium is officially coming to an end on August 31. 

But even as student loan payments are set to resume, the Biden administration is rolling out new student loan forgiveness under the IDR Account Adjustment. This temporary program may provide borrowers with retroactive credit toward loan forgiveness under Income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). Some borrowers will receive enough credit to reach the threshold for loan forgiveness (which is either 20 or 25 years for IDR, and 10 years for PSLF). Earlier this month, the Education Department notified over 800,000 borrowers that through the beginning of August, they have reached the milestone for student loan forgiveness under the IDR Account Adjustment. These borrowers should have their balances discharged before student loan payments resume.

Student loan interest starts accruing in September, but SAVE plan may waive excess interest

With the student loan pause expiring at the end of August, interest will start accruing again on covered federal student loans starting on September 1. Most federal student loan interest rates are fixed at the time of their disbursement based on federal law at that time, regardless of market conditions. These loans should return to those fixed interest rates. 

For borrowers repaying their student loans under an Income-Driven Repayment (IDR) plan, the Biden administration is rolling out a new option called the Saving on a Valuable Education (SAVE) plan. The SAVE plan is replacing the Revised Pay AS You Earn (REPAYE) plan, another IDR option. One of the significant benefits of the new SAVE plan is an interest subsidy that will waive excess interest for borrowers whose payments are not high enough to cover all accruing interest. While portions of the SAVE plan will be phased in over the course of the next year, that interest subsidy should be available to borrowers who enroll in SAVE when payments resume.

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Direct consolidation by December to access student loan forgiveness under IDR account adjustment

The Education Department will be implementing the IDR Account Adjustment automatically for borrowers who already have government-held federal student loans, including all Direct loan borrowers. So, many borrowers will not have to take any steps to receive the benefits of the adjustment.

However, borrowers who have commercially-held FFEL loans and other federal student loans not held by the department will need to consolidate those loans via the federal Direct consolidation loan program in order to benefit from the IDR Account Adjustment. The deadline for doing so is April 30, 2024.

IDR income recertification due in early 2024

According to the Education Department, borrowers who were in an IDR plan prior to the student loan pause in March 2020 will not need to immediately recertify their income. Unless borrowers have submitted income information during the three-year pause period, their IDR payments should revert back to what their payment amount was when the student loan pause first began. Furthermore, borrowers will not have to recertify their income for at least six months after the student loan pause ends, according to the department – which means early 2024 at the soonest.

That said, borrowers who have experienced a reduction in income or other significant changes to their circumstances (such as job loss or divorce) can request a recalculation of their IDR payments at any time. And borrowers who want to change IDR plans – such as switching to the SAVE plan – will need to apply. Borrowers who have been in the Revised Pay As You Earn (REPAYE) plan will be phased in to the SAVE plan automatically, however. 

Key student loan payment and default resolution flexibilities end in 12 months

Several other temporary Biden administration initiatives will end 12 months after student loan payments resume:

• Student loan repayment on-ramp: The Education Department announced a one-year on-ramp period to ease borrowers’ transition back into student loan repayment. During this time, borrowers won’t be penalized – such as through late fees, defaults, or negative credit reporting – for missing payments. However, these months won’t count toward student loan forgiveness under IDR or PSLF if borrowers don’t make required monthly payments.
• Stopped collections for defaulted borrowers: The Biden administration will extend stopped collections efforts against defaulted federal student loan borrowers for 12 months after the student loan pause ends. That means borrowers won’t incur collections fees, and won’t be subject to wage garnishment, Social Security offset, or tax refund interception during that time.
• Fresh Start initiative: During this same period, borrowers can get out of default through the Fresh Start program – a temporary initiative that gives borrowers a pathway back into good standing and regular repayment. Once out of default, borrowers can access many repayment and federal student loan forgiveness programs.