Do These 6 Things Before Student Loan Payments Resume

Student loan payments are set to resume as soon as the longest national forbearance in history comes to an end.

For over three years, the student loan pause has suspended payments, frozen interest, and halted collections for most student loan borrowers. Originally intended to last six months during the early stages of the Covid-19 pandemic, former President Trump – followed by President Biden – implemented several short-term extensions, often at the last minute.

But in June, President Biden reached a deal with Congressional Republicans to avoid a debt ceiling crisis. The resulting bipartisan federal spending legislation codified the end of the student loan pause. The moratorium officially ends on August 31. Interest will start accruing on the following day, and the first student loan payments will be due in October. 

The Education Department has been steadily escalating communications with millions of borrowers, notifying them that this time, the student loan pause is really ending, and that borrowers should be prepared for payments to resume.

Here’s a breakdown of what borrowers should be doing in the next few weeks.

Update your student loan contact information in two places

Many borrowers’ circumstances have changed during the last few years, and millions of borrowers have moved. At the same time, the Education Department’s student loan servicing system has gone through a massive upheaval. The majority of federal student loan borrowers have a different loan servicer now than they had in March 2020, when the student loan pause first began.

It is critical that borrowers update their contact information to ensure that they receive correspondence and critical communications. Borrowers should update their contact information in two places. First, do so at StudentAid.gov, the Education Department’s centralized web portal for all federal student loan borrowers. This website will also provide information on your current loan servicers. Then, update your contact information with your loan servicer; the easiest way to do this would be to create an online account with that servicer, if you don’t already have one. Be aware that updating your contact information on StudentAid.gov does not automatically update your information with your loan servicer.

Evaluate student loan repayment plans

The payment plan you were on before the student loan pause went into effect may no longer be the best plan for you now. For example, borrowers who were not on an Income-Driven Repayment (IDR) plan before March 2020 may want to consider one now, if their financial circumstances have changed. 

In addition, borrowers who have been in repayment for a long time could benefit from the IDR Account Adjustment, a one-time initiative by the Biden administration that can provide “credit” to borrowers toward 20- and 25-year IDR loan forgiveness, even for borrowers who are not currently in an IDR plan. But borrowers who receive significant IDR credit that still leaves them short of the threshold for student loan forgiveness would need to continue repaying their student loans under an IDR plan to make ongoing progress. 

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Switch IDR plans or recalculate student loan payments

The Biden administration just unveiled a new IDR plan called the Saving on a Valuable Education, or SAVE, plan. Officials are touting this new option as the most affordable IDR plan ever established. Indeed, SAVE will feature significant benefits, including a more affordable payment formula, accelerated student loan forgiveness for small starting balances, and interest subsidies that will eliminate future negative amortization. 

Borrowers already enrolled in the REPAYE plan – another IDR program – will be automatically transitioned to SAVE, according to the Education Department. But other borrowers will need to affirmatively switch to SAVE. While enrolling in the SAVE plan will make sense for many borrowers in other IDR plans, it may not make sense for everyone (for example, the PAYE plan could be a better program for some graduate school borrowers, given PAYE’s 20-year loan forgiveness term versus SAVE’s 25-year term for borrowers with graduate school debt.) 

In addition, borrowers who have experienced a reduction in income since their last income recertification – which may have been back in 2019 for some – may want to explore requesting a recalculation of their IDR payments. Borrowers can request a payment adjustment under IDR plans at any time, due to changed circumstances. 

Enroll or confirm autopay for student loan payments

Borrowers who were enrolled in automatic payments when the student loan pause first went into effect should not assume that autopay will simply restart again. Most, if not all, borrowers will need to re-enroll in autopay, in addition to borrowers who are enrolling for the first time.

“Autopay is optional, but if you choose autopay, you’ll save 0.25% on your interest rate,” says the Education Department. “On autopay, you'll get a reminder ahead of each withdrawal. Sign up for autopay on your servicer's website. If you were enrolled in autopay before the payment pause, you likely need to reenroll.”

Certify employment for PSLF

For borrowers on track for Public Service Loan Forgiveness (PSLF), it’s not a bad idea to certify your employment, if you haven’t done so yet, or if it’s been a while since your last employment certification. The Education Department only “counts” months toward PSLF up through the date of a borrower’s most recent employment certification. You must certify employment regularly (the Education Department recommends annually) to get updated PSLF payment counts. 

In addition, borrowers who want to maximize PSLF credit under the IDR Account Adjustment should be sure to certify any public service employment they have had since October 1, 2007 by the end of 2023. Under the IDR Account Adjustment, past loan periods that normally would not count toward PSLF (such as certain deferment and forbearance periods) can potentially be credited – but only if you certify your employment.

The Education Department’s new online PSLF portal allows borrowers and their employers to certify employment entirely online, without the need for cumbersome paper applications. Borrowers should be aware that if your loans are not already serviced by MOHELA – the Education Department’s contracted PSLF servicer – your loans will be transferred to MOHELA after certifying your PSLF employment. 

Be aware of pitfalls of temporary student loan repayment flexibilities

The Biden administration is implementing several flexibilities to ease the transition back to repayment. 

Borrowers will not have to make payments during the month of September, even though the student loan pause technically ends on August 31. This month will be treated as an administrative forbearance. However, the Education Department has not made clear whether this month will count toward student loan forgiveness under IDR and PSLF. Borrowers who are concerned can contact their loan servicer before August 31 to opt out of the administrative forbearance and begin payments in September, rather than October.

The Education Department is also implementing a 12-month “on-ramp” period for the first year after payments resume. During this period, borrowers will not incur certain adverse consequences for missing payments, such as late fees or negative credit reporting. Borrowers also won’t go into default on covered federal student loans. However, interest will still be accruing, and missed payments will not count toward student loan forgiveness under the IDR and PSLF programs.