Student Loan Payments Resume in a Month, but Interest Resumes Sooner

Federal student loan borrowers have been living payment-free lives for over three years, but that’s all about to change. But even before they resume making monthly payments come October, they will already have seen interest start racking up. To soften the impact of the end of Covid-19 emergency forbearance, interest on federal student loans began accruing on September 1st, with payments resuming a month later on October 1st. 

How Much Interest Can I Expect to Pay? 

With the economic struggles caused by the Covid-19 pandemic, the return of monthly student loan payments has many worried how it will impact their finances. After soaring inflation over the last couple of years and rising interest rates, borrowers are surely wondering what sort of rate they can expect to see after three-and-a-half years of 0%. For federal loans, Federal Student Aid promises that “Most borrowers’ interest rates will be the same as before the 0% interest began.” If you’ve consolidated to take advantage of the LWO or IDR Account Adjustment, however, you will likely have a new interest rate, which the Education Data Initiative will be between 4.99% and 7.54%, depending on the type of loan.

Other Tools and Opportunities for Borrowers to Save

If you’re concerned about payments resuming, you’re not alone, but there are also a lot of ways to set yourself up to save some money. First, make sure that you’re prepared to start making payments, up-to-date on correspondence, etc. If you’re afraid you can’t afford your payment, consider recertifying your income if it’s gone down over the last three-plus years. You can also enroll in the new SAVE plan, which will—once fully implemented—lower borrowers’ payments to 5-10% of their discretionary income. In the meantime, if you miss a payment, or make it late, FSA has created an “on-ramp transition period” until Sept. 30, 2024: during that time, borrowers who miss payments will not be considered in default, nor be reported to credit agencies as being delinquent. 

Just because the on-ramp period is there, don’t wait until you miss a payment to get help with your student loans. Your student loan professionals are always here to help you get on track and find the best path for you and your financial future.