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Student Loan  |  September 6, 2022  |  Lisa Litant

How to Prepare for the End of Federal Student Loan Relief

When the federal student loan relief program began in March 2020, it meant a temporary interest freeze for almost 40 million borrowers of federal student loans and a collections halt for federal loans in default. With the newly proposed federal student loan cancellation program, students will be forgiven $10,000 of federal student loan debt if they make less than $125,000 or if their household income is less than $250,000. If you have a Pell Grant and meet the income limit, you may qualify for $20,000 in canceled loans.^{footnote 1}

Keep in touch with your loan servicer for updates on how this important forgiveness program may apply to your loans

Note: Students with private student loans are back to making regular payments.^{footnote 2}

When Does Student Loan Repayment Start?

At this point, the remainder of federal student loans are expected to return to repayment in January.

For the actual date, watch for a billing statement from your federal loan servicer. It’ll come at least 21 days before your first post-relief payment is due—and it’ll list the exact amount of that payment. If you want an estimate of the date and amount before the statement comes, start by logging in to your account.

Will your student loan payments change?

There's a chance that they may. Your payment will be based on:

• The amount of your current principal and interest balance
• The time you have remaining to repay your loan
• What plan you’re on; if you’re on an income-driven repayment (IDR) plan and you haven’t changed it during the student loan relief period, your payments will be what they were before. If you’re on one of the other more traditional plans (standard, graduated, or extended) your payment amount may be recalculated.

According to studentaid.gov, if you paused payments during the student loan interest freeze, the date you pay off your student loans may be extended. For instance, if your repayment term is 10 years and you paused for two years, then that 10-year date may be pushed out two more years.

On the other hand, if you’re on an income-driven repayment (IDR) plan, then those suspended payments will likely count toward your forgiveness and your end date probably won’t be pushed out.

Note: Your loan's interest rate will not be impacted by your choice of repayment plan.

What To Do Before Federal Student Loan Relief Ends

Since it may have been a while since you’ve made federal student loan payments, studentaid.gov suggests these steps to take before your repayments start again.

1. Make sure your contact information is still correct for both your federal loan servicer and your studentaid.gov profile, especially if your address has changed.
2. Confirm you’re still enrolled in auto debit. If you’re not, sign up for it through your loan servicer. Note: according to studentaid.gov, for most borrowers, auto debit won’t automatically resume—you’ll need to opt in again. It’s best to check with your servicer; your participation may depend on when you opted in or out of the payment pause.
3. Find a repayment plan that meets your financial needs by using a loan simulator. You can also see if consolidation is a good idea for your situation.
4. Think about requesting an income-driven repayment (IDR) plan. It may make your federal student loan payments more affordable since they’re based on your income and family size.

If you’ve been taking advantage of the student loan relief, you may be out of the habit of making regular payments. Start putting aside money now for when payments resume.

What You Can Do After Federal Student Loan Relief Ends

This is a good time to look at your income and expenses to see what impact student loan payments will have on your budget. YourMoney Pro is a free resource that can help you manage your money and create a plan for your financial goals.

There may be some other ways to get help making your payments:

• You can request additional relief.
• You can see if you’re eligible for the Public Service Loan Forgiveness through your employer.
• You can consider refinancing, but understand that you might have to give up federal student loan benefits like income-driven repayment (IDR), forbearance and deferment and Public Service Loan Forgiveness.
• If you’re in a temporary financial bind, deferment or forbearance might help you suspend payments for a short time.

One thing not to do is to ignore your required payments, which would put your account in default. This is a serious decision. Consequences of being declared in default include:

• Being reported to the credit bureaus—which can affect you buying a house or car or getting a credit card.
• The entire unpaid balance being due immediately.
• The garnishment (withholding) of your wages, which will be sent to the loan servicer.

At the first sign of financial difficulties, contact your federal student loan servicer to find out what repayment options are available to you.

With a little planning now, you can feel confident as you move ahead with your monthly federal student loan payments.