Student Loan Repayment Changes to Know About

Student loan payments have been deferred again, meaning federal student loan borrowers can postpone their payments—interest-free—for a while longer. Payments are now due beginning Aug. 31, 2022.

If you have outstanding federal student loans, here is what that means for you:

Prepare to Resume Student Loan Payments

It’s been a couple years since borrowers were required to make their student loan payments. The pandemic-related freeze has continued to be helpful for borrowers as they grapple with sky-high inflation, and the effects it’s having on their money.

But by the end of the summer, payments are expected to resume. The government does not plan on pushing the deadline off longer. So if you’ve been taking a break from making your student loan payments, now is the time to get prepared.

Make Student Loan Payments Now

Just because loan payments don’t have to be paid right now, doesn’t mean they shouldn’t be. The current payment pause just means that no interest is accruing right now. However, that won’t be the case for much longer. When payments resume, so will the interest. 

This interest-free period is a great time to pay down your student loans, because you can focus solely on the principal. Another benefit is that when interest does start accruing again, it will be on a smaller total amount, meaning you’ll owe even less.

Income-Driven Repayment Plan and Public Service Loan Forgiveness Changes

There are a few different kinds of student loan repayment options:

• Standard 10 Year – Your monthly payments are fixed and determined by a 10 year repayment period.
• Graduated payments – This option allows borrowers to start at a smaller monthly payment, and increase the amount over time. The time horizon is still typically 10 years.
• Extended repayment – Some borrowers may be eligible to make smaller monthly payments for an extended repayment, which can be up to 25 years. 
• Income based/income contingent – An income-based repayment plan factors in your income, and adjusts monthly payment amounts accordingly. There are multiple plans that fall under this category, including Revised Pay As You Earn Repayment Plan (REPAYE,) Pay As You Earn Repayment Plan (PAYE,) Income-Based Repayment Plan (IBR,) Income-Contingent Repayment Plan (ICR) and the Income-Sensitive Repayment Plan.

There are a number of changes in place for borrowers on an income-driven repayment (IDR) plan, or who have Public Service Loan Forgiveness (PSLF.)

PSLF – Before the changes, PSLF applied to a specific type of loan. Now, as long as you worked at a qualifying employer and either paid on time or were in a government-mandated forbearance period, you can receive a credit for that time. 

IDR – The Department of Education is conducting an adjustment that will count forbearances longer than 12 consecutive months and 36 months cumulative toward IDR loan forgiveness. You can read more about these changes here.

Prepare Your Budget

If it’s been a couple years since you’ve made a loan payment, you might want to start making payments now. This will help you get in the habit before payments begin in earnest.

Regardless of how big or small your payments might be, they still need to be factored into your budget. Consider taking what your payment was before the pause and depositing it into a savings account so you are getting in the habit of setting that money aside. It could take a few months to get into the swing of things, so it’s better to figure that out now, before interest kicks in again.

Get Familiar with the Logistics

A lot could have changed over the past couple years. Your loan service provider may have changed, your debit card might have expired, your password might not be what you thought it was, etc. Take the time now to get familiar with your loan payment process to avoid scrambling at the last minute.

Visit StudentAid.Gov for more information and resources.