Student Loan Repayment Begins

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Time to Pay the Student Loans Again

After three years and nine extensions, the pandemic student loan repayment pause is ending. Payments will be due starting October 1, 2023. Are you ready for payments to resume? We wanted to share some helpful tips on how to prepare:

Approximately, 7 million federal student loan borrowers are new enough to the system that they have never had to make a payment on their loans. That changes in October, when loan payments come due after the years-long pandemic pause, and these brand-new borrowers take the first steps of a long journey toward paying off their debt.

All borrowers should become familiar with the U.S. government’s student loan portal. You’ll need your FSA ID to access your account. If you don’t have one, or don’t remember it, it could take some time. So don’t delay. Also, take the time at the U.S. government’s loan portal to make sure your contact information is up-to-date, and you know who your loan servicer is.

Borrowers can use the loan simulator to pick a repayment plan that works best for you. Be sure to check to see if you qualify for loan forgiveness through the Public Service Loan Forgiveness program or the new SAVE plan. Other suggestions include enrolling in autopay to lower your interest rate.  If you can’t afford payments, see if you qualify for $0 monthly payments under the SAVE plan.

In some ways, student loans are like any debt: as time passes and interest piles up, you end up paying more and more than you originally borrowed. But student loans also have some unique traits. Understanding the quirks of student loans will help you make better informed decisions.

How does interest work with student loan repayment?

  • Interest accrues daily, starting the day your loans are disbursed. If you have a subsidized federal loan, then the government will pay your interest while your loans are in deferment. Otherwise, you will be responsible for the interest.
  • Unpaid interest is capitalized—added to the principal—after you pause payments with deferment or forbearance. In other words, you will pay interest on your interest unless you have a subsidized federal loan.
  • Negative amortization is when the total amount you owe increases even though you are making payments. This happens when your payments are not high enough to cover your interest, which can happen on income-driven repayment plans or during periods of deferment and forbearance.