Student Loan | September 6, 2022 | Lisa Litant
What you'll learn
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
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:
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.
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.
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.
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:
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:
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.