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Student loan payments start soon: Everything you need to know

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DES MOINES, Iowa (WHO) — The student loan payment pause is coming to an end on Friday, September 1.

This comes after the Supreme Court ruled back in June that President Biden did not have the authority to cancel student loan debt. The federal pause on payments then had 60 days to come to an end.

During the pause, payments weren’t required and interest didn’t accumulate for borrowers. Interest will begin accruing on Friday for the first time since March 2020, and payments will resume in October for borrowers across the country.

Drake University says that around 60% of students who obtain an undergraduate degree from its institution take out student loans. Drake’s Director of Financial Aid, Ryan Zantingh, says that this will impact both current and former students.

“Interest will begin on unsubsidized loans, so that’s one change for current students. For students no longer enrolled in school, they are going into repayment starting in October. Some borrowers may have been making payments before the pause, so they will just continue making payments. Students that graduated during the pause will begin to make payments for the first time,” says Zantingh.

Borrowers will have different dates in October in which their loans will be due, according to the Education Department, and will be notified of that due date well before payments restart. You may have already heard from your loan provider about your due date.

Financial advisers, like Ryne Oller of West Des Moines’ Foster Group, say that the most important step right now for borrowers is to find and contact their student loan servicer.

Oller says, “In some cases, the servicer of that student loan may have changed, and so I’m guessing that many people have not logged in quite a while, so I’d say figure out how to log in, and get familiar with the website, and see what that required monthly payment is.”

If you don’t know who your loan provider is, you’ll need to log into the Federal Student Aid website.

Oller also says that borrowers can look into income-based plans to repay their loans. The Biden Administration announced last week another income-based plan known as the Saving on a Valuable Education (SAVE) Plan.

The new plan could give some borrowers $0 monthly payments. According to the Education Department, any borrower with eligible loans can qualify for the SAVE Plan, which replaces the Revised Pay As You Earn Repayment plan, or REPAYE.

Generally speaking, a borrower on the SAVE plan will owe 10% of their discretionary income. 

Setting your payment plan is one of a number of things NerdWallet recommends doing before October. The personal finance company also suggests reviewing your budget and setting up autopay — a step that could reduce your interest by 0.25%.

And don’t expect Biden to suddenly extend the payment pause: as part of the debt bill signed earlier this year, that freeze cannot be extended again.

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