When do I have to start paying my federal student loans? What to know as interest begins
Interest on federal student loans resumes Sept. 1. With payments due in October, we’re answering your questions about coming out of forbearance and the new income-driven repayment plan.
Approximately 43.4 million student loan borrowers (with $1.63 trillion in outstanding loans, according to the office of Federal Student Aid) will have payments due next month.
Before then, all borrowers should make sure their contact information is up to date with their loan servicer and your StudentAid.gov profile. Then, be sure to get information about your next payment (including your payment due date, upcoming interest and payment amount) and explore your repayment options.
What’s SAVE plan?
The application for the Saving on a Valuable Education plan officially launched Aug. 22 and is aimed at low to mid-income borrowers. The White House calls the Saving on a Valuable Education plan the “most affordable repayment plan ever created” and estimates over 20 million borrowers could benefit. Payments are based on your income and family size.
While the full power of the Saving on a Valuable Education Plan doesn’t go into effect until July 2024, several pieces are already in play:
More income is shielded for basic needs, giving you less discretionary income (which payments are based on). For instance, if you make less than $15 an hour, you won’t have to make payments.
Your loan balance won’t grow because of unpaid interest if you keep up with payments.
Your spouse doesn’t need to cosign your application if you’re married and file taxes separately.
You can sign up by going to StudentAid.gov/SAVE. If you’re already enrolled in the Revised Pay As You Earn (REPAYE) plan, you’ll be automatically enrolled in this one. SAVE applications are expected to take about four weeks to process.
Here’s what changes next year:
Payments on undergrad loans will be cut in half for those on the plan.
If you originally borrowed $12,000 or less, your remaining balance will be forgiven after 10 years of payments. For every additional $1,000 borrowed, add another year.
If you apply for the plan, you’ll still need to make payments starting in October.
That said, the Education Department is also implementing a 12-month “on-ramp” to ensure borrowers who miss payments won’t be considered delinquent, reported to credit bureaus, placed in default or sent to a debt collection agency.
What about forbearance?
Federal student loans have been on pause since March 2020. But that’s about to end.
Most people haven’t been making payments, except for about 500,000 borrowers, or 1.16%, who have, according to NerdWallet.
If you’re applying for the SAVE plan before the current forbearance period ends, you’ll be asked to leave in or take your loans out of forbearance.
If you leave them in, you won’t have to pay until the forbearance period ends in October. If you take them out, you’ll start now.
If you apply for SAVE close to when your bill is issued or before your payment due date, your loan servicer will place you in forbearance for the upcoming billing cycle so you don’t pay more than you need to.
And if your loan servicer can’t process your application before those dates, they’ll place you in forbearance, too, according to the office of Federal Student Aid.
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This story was originally published September 1, 2023 at 7:00 AM with the headline "When do I have to start paying my federal student loans? What to know as interest begins."
