Student Loan Payments Resume Oct. 2023

Millions of student loan borrowers may be asking themselves, “Am I Prepared?” These borrowers are facing challenges as the pause of student loan payments and interest comes to an end. Beginning Sept 1, 2023, interest begins accruing again on student loans, and payments will begin in Oct. 2023. The information below is focused on Federal student loans, but some borrowers also have private loans. For more information about Federal vs. Private student loans, use this link.

Student loan forgiveness and relief options are complex subjects that many find difficult to understand. The information provided here is for reference purposes only. You should conduct your own research, seek professional guidance and advice when making any decisions related to your student loans. Borrowers should utilize the resources at www.studentaid.gov, and check with their loan servicer for assistance.

Preparing for the Interest & Payment Restart

Here are some steps you should take immediately to prepare for resuming your student loan payments.

• Update your contact info with StudentAid.gov.
• Update your contact info on your loan servicer’s website.
  • Your loan servicer may have changed since the last time you made payments.
  • If your loan was transferred you should receive correspondence regarding the change.
  • You may also need to create a login with your new servicer to ensure that your payment history and balance are correct.
• Explore repayment options using the Loan Simulator to compare repayment plans.
• If you’re already on an IDR (Income Driven Repayment) plan, recertify your income.
• Enroll in autopay (optional).
  • Although this is optional, you’ll save 0.25% on your interest rate.
  • Schedule autopay.
• Determine your monthly payment amount.
  • You may receive a “disclosure” from your loan servicer as early as Aug. 2023, and it will include your monthly payment amount.
  • You should receive your first bill in Sept. 2023 and it will include your payment.
  • You can also find it on your servicer’s website once your disclosure or bill is generated.
• Begin making your payments in October by your due date.
  • Include your new loan payments in your monthly spending plan (budget).
    • If you don’t currently have a budget, create one and stick to it.
  • If using autopay, make sure your linked bank account has sufficient funds by the due date to cover your loan payment.
  • If not using autopay, use your servicer’s website to make a payment.
• See if you qualify for any type of loan forgiveness.
  • There are forgiveness options for public service employment, inability to pay due to a disability, and for those who were defrauded by their school.
  • Explore forgiveness programs.

What options are available?

There are lots of options for loan forgiveness, and lowering or pausing your monthly student loan payments. These generally fall into the following categories:

• Forgiveness
  • Public Service Loan Forgiveness (PSLF)
  • Teacher Loan Forgiveness
  • Other Loan Forgiveness, Cancellation, or Discharge options
• Repayment Plan Options
• Consolidation vs. Refinancing
• Deferment vs. Forbearance

Determining what options you qualify for may be difficult, but you can find lots of information at www.studentaid.gov or through your service provider.

Forgiveness (PSLF – Public Service Loan Forgiveness)

Requirements

• 120 payments made under a qualifying repayment plan
• Currently employed full-time with a qualifying employer. This includes:
  • Government organizations – federal, state, local, tribal, and the U.S. military
  • 501(c)(3) non-profits
  • Nonprofits that are not 501(c)(3) exempt may still be a qualifying employer if they devote a majority of their full-time equivalent employees to public service areas like education, law enforcement, civilian service to the military, and others.
  • Full-time employment is considered 30 hours per week
• Eligible loans
  • Any non-defaulted Direct Federal loan
  • The Federal Perkins Loan Program or the Federal Family Education Loan (FFEL) Program don’t qualify. For those to be eligible you would have to consolidate them into a Direct Loan before Dec. 31, 2023.
  • To see what types of loans you have, visit studentaid.gov.

Avoid Scams

If you are contacted by companies offering to help you with relief options for a fee, do not work with them. You never have to pay for help with your Federal Student Aid. Check out https://studentaid.gov/resources/scams for more information on how to to avoid scams or what to do if you fall prey to one.

Applications

All applications must be filled out completely and accurately; otherwise, they may be delayed or rejected.

If you check the box in Section 2, you are stating that you believe that you currently qualify for forgiveness, and you are requesting forbearance while your application is being considered. Forbearance will not count towards your forgiveness if you are not eligible for forgiveness yet. While in forbearance, you won’t be making payments, but interest may continue to accrue, and you probably won’t be making any progress towards forgiveness or paying back your loans.

If you complete the application online at www.studentaid.gov/pslf, you can search for your employers using the PSLF Employer Database and it will populate their information on your application. You must be currently employed full-time by a qualifying employer in order to apply for forgiveness. You will need to complete a separate page for each qualifying employer. Regardless of how many student loan payments you have made, the only payments that are eligible for forgiveness are those you made while working full-time for a qualifying employer.

Teacher Loan Forgiveness

Teacher Loan Forgiveness has many eligibility criteria including the types of loans you have, being employed full-time for 5 consecutive years as a highly qualified teacher, teaching at a school that serves low income students, and others. For more information on eligibility, how to apply, and forgiveness amounts go to www.studentaid.gov.

Other Loan Forgiveness, Cancellation, or Discharge options

Forgiveness, cancellation or discharge all mean essentially the same thing. Other forgiveness options exist for things like disability and school related situations like your school misled you, or closed while you were enrolled or soon after you withdrew. For more information on these and other cancellation options, go to www.studentaid.gov.

Repayment Plan Options

The plans includes:

• Standard Repayment Plan
• Graduated Repayment Plan
• Extended Repayment Plan
• Saving on a Valuable Education (SAVE) Plan—formerly the REPAYE Plan
• Pay As You Earn Repayment Plan (PAYE)
• Income-Based Repayment Plan (IBR)
• Income-Contingent Repayment Plan (ICR)
• Income-Sensitive Repayment Plan

For detailed information on the eligibility (borrower & loan types), monthly payment and time frame, and other information that is good to know for each of these plans, go to www.studentaid.gov.

Before contacting your loan servicer to discuss options, you can use the Loan Simulator to see which plans you may be eligible for.

Consolidation vs. Refinancing

Choosing which of these options is best for you depends on several factions, including your goals, the types of loans that you have, current interest rates, whether you need the federal loan protection benefits, your income & your creditworthiness.

Consolidations

A Direct Consolidation Loan allows you to consolidate (combine) one or more federal education loans into a new Direct Consolidation Loan for the purpose of lowering your monthly payment amount or gaining access to federal forgiveness programs.

Benefits

• One monthly payment instead of multiple
• Lower Monthly Payment
• Access to Income-Driven Repayment Plans
• Access to Forgiveness Options
• Fixed Interest Rate
• There is no application fee to consolidate your federal education loans into a Direct Consolidation Loan.
• Allows you to retain your federal loan protection benefits (e.g. repayment options, forgiveness eligibility, etc.)
• Convert variable rate federal loans to a fixed rate loan.

Disadvantages

• Longer Repayment Period
• More Interest
• Loss of Certain Borrower Benefits
• With limited exceptions, you may only be able to consolidate some or all of your student loans one time.
• You may increase your repayment term.
• Overall you may not have a lower interest rate

For more information about consolidations, go to www.studentaid.gov, www.citizensbank.com, or www.ramseysolutions.com.

Refinancing

Things to consider when deciding if you should refinance some or all of your loans:

• Refinancing is only available through private lenders
• Make sure there are no application or origination fees
• May be a good option if you want to save money and pay your loans off sooner.
• Allows you to have a single monthly student loan payment.
• You have high interest rates on your existing loans
• You can refinance both private or federal student loans; however, your federal loans will be converted to a private loan and you may forfeit the federal loan protection (forgiveness, federal repayment options, etc.).
• You have a mixture of both federal & private student loans.
• You can keep your fixed rate, or convert a variable rate into a fixed rate loan.
• Make sure the repayment term is equal to, or shorter than the term of the current loan payments.
• This is probably not an option if you’ve filed bankruptcy.

For more information about consolidations, go to www.studentaid.gov, www.citizensbank.com, or www.ramseysolutions.com.

Deferment vs. Forbearance

These are two options for pausing your loan payments, but choosing either doesn’t solve your problem with student debt; it just delays progress towards eliminating it. In extreme situations where you can’t afford your basic necessities, these may be your only options; however, it’s recommended that you consider other repayment plans first, and talk with your loan servicer to see what your best options are. Below are links to some articles that provide additional information on the benefits, drawbacks and criteria for each of these.

• https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief
• https://www.bankrate.com/loans/student-loans/deferment-or-forbearance-student-loans/
• https://www.ramseysolutions.com/debt/deferment-vs-forbearance

Plan B

While many borrowers are hoping for, and even banking on, forgiveness through the PSLF program, it is likely that many may not be eligible. So, a Plan B is probably a wise choice.

Ramsey Solutions put together the Guide to Getting Rid of Your Student Loans. This guide includes preparations that borrowers should be making now to prepare for their student loan interest starting back Sept. 1, 2023, and their loan payments resuming Oct. 2023. Additionally, it offers information on other ways to manage your student loan debt.

Thanks for taking the time to read my blog. I’d love to hear your comments, and find out what other topics you may be interested in.

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