What To Know Before Student Loan Payments Resume
By Matt Konrad
Update, April 5, 2022: The Biden administration has announced that the pause on loan payments and interest will remain in place through August 31, 2022.
In March of 2020, during the earliest days of the COVID pandemic, federal student loan borrowers were granted a much-needed reprieve: all loan repayments were temporarily suspended, and interest rates reduced to 0%.
While that freeze remains in place today, it may not be permanent. An estimated 43 million Americans are carrying at least some student loan debt. If yours is one of them, here are three things you should know before payment requirements resume.
Double-check your repayment plan.
The pandemic threw lots of people’s employment and income into turmoil—and if you felt the effect on your job or earnings, you may qualify for a more generous Income Driven Repayment (IDR) plan than you did before 2020. There are a wide variety of Income Driven Repayment plans, each with distinct qualifications and parameters; the Loan Simulator tool on StudentAid.gov can help you figure out what you may qualify for.
It’s important to do this research well in advance of loan payment resumption, as it can take 6-8 weeks to process any change in your IDR status. And if you’re already in an IDR plan, note that your loan servicer (the company that handles your payments on behalf of the government) may ask you to recertify your income and eligibility before January 31. You can do so through your servicer or on the StudentAid.gov website.
Know your details.
Loan repayments may have been on pause, but there’s been plenty happening behind the scenes during the last year and a half. Among the changes with the biggest impact: several major loan servicers are ending their federal contracts, meaning up to 16 million borrowers are likely to be transitioned to new servicers within the next two years.
In theory, these transitions shouldn’t affect borrowers, but the reality is that they’re not always seamless—at the very least, you’ll probably need to update your auto-pay or remittance information as a result.
Even if you’re not affected by any of the servicer transitions, it’s a good idea to double-check your basic information well before payments restart, including your contact information, past payment records and credit report. (You can get a detailed credit report free at AnnualCreditReport.com—it’s usually limited to once a year, but during the pandemic you can access it as often as weekly.) Here’s a good guide to other info to keep in mind.
Loan forgiveness has expanded—but not to everyone.
There’s been plenty of discussion since the 2020 election cycle about student loan forgiveness, but so far there hasn’t been any across-the-board action. However, recent changes to the Public Service Loan Forgiveness (PSLF) program have resulted in good news for thousands of borrowers working as teachers, first responders and social workers, or as attorneys or doctors for underserved populations.
The program overhaul expanded eligibility for different types of loans; applied credit for misclassified previous payments and retroactively re-classified certain other loans that weren’t initially listed as eligible. It may sound esoteric, but it has real impact. As CNN reports:
Eligibility for the PSLF program is temporarily expanded until October 31, 2022, so that it now includes borrowers who have older loans that didn’t originally qualify as well as those who were in the wrong repayment plan but met the other requirements. … More than 550,000 people are expected to see their debt wiped away sooner than expected due to the changes.
If you think you may qualify for PSLF under the new expansion, you can learn more and get help here. (NPR education correspondent Cory Turner also outlined the big updates in this handy Twitter thread.)
The last two years of payment freezes and zero-percent interest were a welcome relief as the nation addressed the pandemic. For those who fell ill, became unemployed or lost loved ones, student loans were one less thing to worry about. For those who were able to make payments, the reduction in the interest burden means you’re that much closer to being debt-free.
While the resumption of payments may be an unwelcome return to normal, these steps should help you put yourself in the best position to avoid surprises and ensure you’re getting the best terms you can.