The U.S. Department of Education’s COVID-19 relief for student loans is ending this fall. Student loan interest resumed starting September 1, and monthly payments will be due starting in October.
Although Illinois State University alumni default on student loans at a low rate (1.7%), below the national average (2.3%), resumption of student loan payments will impact alumni with outstanding student loan balances.
Illinois State Director of Financial Aid Bridget Curl answered some key questions associated with managing student loan repayment following the government’s three-and-a-half-year payment pause.
When is the first monthly student loan payment due?
Bridget Curl: First payments will be due in October of 2023. Students should confirm with their loan servicers to find out when their first payment is due. Students who graduated in spring 2023 will still have a six-month grace period, and many may not have a payment due until November. Once again, they should be in contact with their loan servicer to confirm their first payment due date.
What action should borrowers take now to prepare for payments to resume?
Curl: Borrowers should contact their loan servicer and make sure their loan servicer has their most up-to-date contact information. Students are able to create an account with their loan servicer and may be able to avoid long wait times on the phone by logging into their loan servicer portal to see what information is available there. Students can look up who their loan servicer is by logging into StudentAid.gov. Due to staffing shortages and the high volume of calls and emails, wait times will likely be high when reaching out to loan servicers.
How are individuals who graduated during the three-and-a-half-year student loan payment hiatus impacted?
Curl: These students have not been required to make payments on their federal student loans since graduating and may face difficulties budgeting for loan payments that they have not been required to make these past few years. It’s important that they reach out to their loan servicer and discuss their options if they anticipate having difficulty making their monthly payment. There may be other payment plan options available that may help students reduce their monthly payments to make them more manageable.
The Biden Administration has announced an “on-ramp” period that begins October 1, 2023, and ends September 30, 2024. During this time, missed payments will not be reported as delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies. While students will not see immediate repercussions for missed payments, it is still highly recommended they work with their loan servicer to enter repayment since interest will still be building on their loans, and missed payments will not count toward certain loan forgiveness programs that require a certain amount of payments to qualify.
What is the SAVE Repayment Plan?
Curl: The SAVE Plan is a new income-based repayment plan that can reduce a student’s monthly payment, and, in some circumstances, students may have no payment due at all. Also, depending on the amount of loan debt a student has will decide how many payments they must make to qualify for loan forgiveness of their remaining debt. The minimum number of payments is 120 (10 years) and the maximum is 300 payments (25 years).
It is highly recommended that students look into all their options, including their eligibility for the SAVE Plan. For more information on the SAVE Plan, including how the number of payments needed is calculated, we recommend students visit StudentAid.gov/announcements-events/save-plan.
What resources would you suggest for individuals with additional questions?
Curl: The U.S. Department of Education has a webpage devoted to preparing to enter repayment: StudentAid.gov/manage-loans/repayment/prepare-payments-restart.
The ISAC (Illinois Student Assistance Commission) also has a webpage devoted to repayment: ISAC.org/ReturnToRepayment. This page also has a link to register for webinars they will be offering throughout the month of September. The Financial Aid Office is always happy to help answer questions, but we will only be able to answer general questions and will not be able to answer specific questions for students, such as when their first payment will be, how much their payments will be, etc. Those questions can only be answered by their loan servicer.
