After a three-year pause, federal student loan payments are about to be collected again.
The pause on federal loan payments has been extended eight times since March 2020 as part of a Covid-19 relief measure.
This time, however, the resumption of payments is stipulated in legislation: as part of the agreement between President Biden and House Speaker Kevin McCarthy to raise the country’s debt ceiling, the pause on federal student loan payments must end “60 days after June 30,” which means around September 1. As stipulated by law, the likelihood of Biden extending the measure is reduced.
The bill to raise the debt ceiling has been approved by the House of Representatives and is now in the hands of the Senate. Senators are also expected to approve the bill, which will then be sent to President Biden for his signature to become law.
The interruption of these payments provided relief to about 27 million borrowers and another seven million in default, who received a suspension of wage garnishment and other collection efforts. Interest also stopped accruing during this period.
When will my payments restart? And how?
You should receive a notice or billing statement at least three weeks before the due date of your first payment, which should include the payment amount and due date. If you don’t want to wait, you can contact your loan servicer for this information.
If you were on an automatic payment plan before the pandemic—meaning before March 13, 2020—you will need to re-enroll. Your service provider should reach out to you to inquire about this. If you do not respond, your payments will not automatically restart.
If you enrolled in automatic payment after that date, automatic payments will resume. Borrowers who continued making payments do not need to do anything.
Good news may be on the way
Millions of borrowers could see up to $20,000 of their debt disappear if the Supreme Court allows the Biden administration to proceed with the plan to cancel part of the debt. (A decision is expected by the end of June.) The program, if it passes through the Court, will cancel $10,000 of debt for single individuals earning less than $125,000 and married couples and heads of household with incomes below $250,000. Borrowers who received Pell Grants and meet the aforementioned income caps may qualify for an additional $10,000 in debt relief.
Source: The New York Times