Restarting Repayment After the COVID-19 Payment Pause

Federal Student Loan Holders

In March 2020, the U.S. Department of Education’s office of Federal Student Aid initiated temporary relief for federal student loans owned by the U.S. Department of Education (ED) by suspending loan payments, stopping collections on defaulted loans, and reducing interest rates to zero percent. ED extended federal student loan relief multiple times, but, in June 2023, Congress passed  a law preventing further extensions of the payment pause. For most borrowers, the first payment after the payment pause ended was due in October 2023.

ED is now providing a 12-month on-ramp to repayment, starting on October 1, 2023, and ending on September 30, 2024. This means financially vulnerable borrowers who miss payments during this time will not be considered delinquent, have their loans placed in default, or be referred to debt collection agencies. However, interest will continue to accrue on all student loans. This is only a temporary solution, and after the on-ramp period, borrowers who do not pay are at risk of default.

Where to Start

• To understand the specifics on each type of federal loan, read the Federal Student Aid Loans page.
• The federal government has offered several programs to eliminate the burden of student debt in recent years. By logging in to your Federal Student Aid (FSA) account, you can confirm the exact amount you owe and through which servicers.
• If you don’t repay your loan in a timely manner, delinquent payments may impact your overall financial health and damage your credit score. As a last resort, borrowers can request a temporary deferment or forbearance.
  

Restarting Payments

• Once you know how much you owe, you can use the Department of Education’s Loan Simulator to compare repayment plans. An income-driven repayment (IDR) plan will lower monthly costs for many borrowers. For most borrowers the new SAVE Plan is even more affordable - cutting payments in half for most borrowers and forgiving debt faster.
• To seek an IDR plan or Public Service Loan Forgiveness (PSLF), you may need to consolidate your loans into a new Direct Consolidation Loan. For IDR plans, the deadline to consolidate loans is April 30, 2024.
• Look into loan forgiveness and debt restructuring options. For example:
  • Public Service Loan Forgiveness: Borrowers who are or have been employed in government service or non-profit organizations and have been making payments on their loans for 20 years (120 months) may be eligible to have their loans forgiven. Read DCWP’s Public Service Loan Forgiveness (PSLF) page for more information.
  • SAVE Plan: For most borrowers, the SAVE Plan provides the lowest monthly repayment rates. Borrowers previously in REPAYE are automatically transferred into SAVE. Under the SAVE Plan, single borrowers who earn less than $32,800 per year or those in a family of four making less than $67,000 have a $0 payment.
  • As of February 2024, borrowers who took out less than $12,000 in debt are enrolled in the SAVE Plan. SAVE Plan participants that have been in repayment for ten years will have their loans cancelled.

• To learn more about each of these options or to explore other options that may be available to you, you can get in-person help by meeting with a financial counselor for free at an NYC Financial Empowerment Center.
• For borrowers with defaulted federal student loans, the Fresh Start program provides special benefits. Requesting a Fresh Start is fast and easy and will make you eligible for IDR plans and other relief. Learn more about Fresh Start and apply through Federal Student Aid.

Other Student Loan Holders

Private loans are made by banks or other financial institutions and are private contracts between the borrower and the institution.  They were not automatically paused during the pandemic and must be individually negotiated with the financial institution. Have private student loans? Visit the Consumer Financial Protection Bureau website to learn about your options.

Student loan debt shouldn’t mean student loan stress. NYC Financial Empowerment Center counselors can help you lower monthly payments, explore loan options and forgiveness programs, or get out of delinquency or default, depending on your loans. Learn more and book an appointment for free one-on-one financial counseling.