Student loan restart: Interest rates on loans kick back in starting Friday; what to know

On March 13, 2020, payments on federal student loans were frozen, and the interest rates on those loans were set at 0%.

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But as of Friday, those interest rates begin to accrue, and as of next month, payments on the loans will once again be due.

What does that mean for federally funded student loans? Here’s what we know now:

Loan payments are coming due, what about student loan forgiveness?

The U.S. Supreme Court in June rejected Biden’s student loan forgiveness program, which would have canceled as much as $20,000 in student loan debt for individual borrowers, totaling $430 billion.

A plan was announced by Biden in July that adjusts the way the Education Department calculates certain student loan payments. The adjustments are being made, the department said, to correct past errors in counting payments and the result would show that borrowers made payments that were not counted correctly toward their debt.

The Department of Education has a remedy for borrowers who were misled by their for-profit college that allows them to apply for student loan forgiveness under a program known as borrower defense to repayment.

Also, if you are disabled, there is a program that can help you to see if you qualify to have your loan discharged.

What happens to the loans on Friday?

The interest rate of a student loan is set when a borrower takes out the loan. That interest rate will be the same as it was before March 13, 2020.

What about my payment, when is it due?

For those with federally funded loans, payments will be due again beginning in October. When in October depends on the payment date the loan servicer set with the borrower

Borrowers can expect to receive a bill with payment details and dates at least 21 days before the first payment is due.

However, under the Biden administration’s plan, if you are unable to make a payment or just decide to skip it, there will be no financial consequences other than interest accrual for up to another year.

If you graduated this year, you do not have to make payments until the grace period expires. That is generally six to nine months after leaving school.

Will my payment go up?

Your payment should stay the same. If your payment is income-based, it could change if your income either went up or down.

You do not have to report a change in income until March 2024, so if your income has gone up, you have until then to let your loan servicer know.

If your income has dropped, you should let your servicer know that now. It could lower your loan payment.

Are there any ways I can do better on my plan?

Borrowers are automatically enrolled in a standard, 10-year repayment plan, however, a borrower can apply for different kinds of income-driven plans that could lower their monthly payments.

Click here to see some options.

Who is the loan’s servicer?

If you are unsure about who is servicing your loan, you can go to the Federal Student Aid website to find out.

What if I don’t make the payment?

Until Sept. 30, 2024, the government is providing an “on-ramp period.” That means borrowers will not have missed payments reported to the national credit rating agencies.

This will automatically happen for borrowers. A person does not have to apply for this benefit.