What are some of the most important things you should know. A three-year payment pause ends in October. A more affordable repayment option is available, and some borrowers will receive a fresh start. The campus of Georgetown University. If borrowers miss a payment on their federal student loan, they will not be considered delinquent in the adjustment period from Oct. 1 to Sept. 31, 2024. After about 42 months, the student loan payment hiatus has officially ended: interest on federal loans begins accruing again in September, and monthly payments will become due in October. The payment may be a concern for borrowers, who may be concerned about squeezing it back into their monthly budget. Life is more expensive than when bills and interest were frozen due to a pandemic-relief measure in March 2020. And your circumstances may have changed since then - you may have extended your family, taken on a new mortgage, or lost health insurance coverage. To help borrowers in this transition, the Biden administration provides some leeway for the first year after payments begin. As the monthly bills begin to arrive, here are some things you must know: If you can make an on-time payment, you absolutely should. But if you miss a bill or two, you will get some wiggle room - at least for the first year after repayment begins.
The Biden administration has provided a year-long 'on-ramp' to help borrowers return to the repayment routine. If you missed a monthly payment from Oct. 1 to Sept. 30, 2024, you won't be considered delinquent. You also won't be reported as such to credit bureaus, placed in default or reported to debt collection agencies.your loan servicer willautomatically put missed payments in forbearance, which, in this case, means they will be tacked on to the end of your loan term. The interest will also continue to accrue on missed payments. However, to avoid paying a significant payment at the end of the term, extra interest may be added to your ongoing monthly bills to ensure you pay your loan off on time. However, if you are enrolled in an income-driven repayment plan and miss a payment, your payment usually won't increase. What is wrong with my credit score? How can this affect my credit score? It's difficult to know for sure, but any consequences aren't likely to be as punishing as an account reported as delinquent. Credit scoring companies may pick up on certain factors - such as a student loan balance that isn't decreasing - and that could affect your credit score depending on how it's interpreted by their scoring models. If you can afford it, you will be able to find a payment plan that suits your needs. The Biden administration recently opened up its affordable income-driven repayment plan, SAVE, which determines the size of your monthly payment based on your income and family size. Most borrowers will find the SAVE plan to offer the lowest monthly payment, which is likely to be the best option for those in financial distress. There's a lot to like about the new plan, which replaces the REPAYE plan. After it's fully in effect next summer, it will cut payments by more than half. The plan also takes away interest: if your regular payment is insufficient to cover the interest owed at that time, the unpaid interest is permanently deleted. This means that those who make payments will not see their balances increase over time, which has happened to many borrowers, leaving them discouraged. Other repayment options exist besides SAVE, such as the standard repayment program, which spreads payments over 10 years. As everyone's circumstances vary, your first stop should be the StudentAid.gov loan simulator tool, which can help calculate which plan makes the most sense using your specific loan details. If you want to participate in SAVE or another plan, get started immediately, as it can take at least four weeks to process your application, and payments begin in October. Borrowers who fell into default before the payment pause - which happens when you're at least 270 days behind on bills - have received a fresh start and are considered current on their payments. To that extent, they can apply for any other repayment plan, such as SAVE. But those who were in default need to take certain steps to do so - and complete them before next September to keep their loans out of default for the long term. Here's how: contact the Education Department's Default Resolution Group - by phone, online or mail - and ask to take your loans out of default through the Fresh Start program. The default group can also help you choose an income-driven repayment plan, such as SAVE, if you want to participate in an income-driven repayment plan. The group will transfer your loan to a regular loan servicer and wipe out the record of default from your credit report. The servicer will then put you into an income-driven repayment plan with the lowest payment you are eligible for. Nearly one million borrowers will have their balances canceled. The remaining balances of the $39 billion federal student loan program are in the process of being canceled. The White House's plan aimed to address past mistakes made by loan servicers that failed to give payment credit where it was due - or that may have provided poor advice when borrowers called for assistance. Many borrowers have already been informed that their balances have been canceled, a process that will continue through the end of the year. After that, borrowers who haven't yet had enough qualifying payments for cancellation will receive their updated payment counts, pushing them closer to the loan term's finish line. For more details, see our guide here. Beware of scammers that prey on those seeking relief or assistance. If you're unsure if a specific offer - including relief from the Biden administration - is genuine, call your loan servicer using a number you find independently, not on any correspondence sent to you.