- The U.S. Department of Education says student loan payment deadlines “start in October.”
- Interest on their debt will start accruing even sooner.
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During the three-year moratorium on student loan payments, the U.S. Department of Education repeatedly told borrowers that claims would be reinstated, only to get them back and give them more time.
But this time, the agency really said it in earnest.
The Ministry of Education posted on its website:Payments start in OctoberA recent law passed by Congress will make it difficult to change that plan.
When pandemic-era policies expire, it is likely to be a major adjustment for borrowers. About 40 million Americans have education debt. A typical monthly fee is around $350.
“For many borrowers, the suspension of payments has been life-changing, saving many from financial ruin and allowing others to finally get back on their feet financially,” he said. rice field. Persis YuDeputy Executive Director of the Center for Student Borrower Protection.
Here’s what you should know:
Former President Donald Trump first announced a moratorium on federal student loan legislation and accrual of interest in March 2020, as the coronavirus pandemic hit the United States and devastated the economy.
The suspension has since been extended eight times.
An analysis by higher-education expert Mark Kantrowitz found that almost everyone eligible for the relief has taken advantage of the scheme, with only 1 eligible borrower continuing to make student loan payments. % less than
Kantrowitz said the policy likely saved the average borrower about $15,000 in student loan payments.
“Congress recently passed a law preventing further extension of payment suspensions,” the education ministry said on its financial aid website.
It refers to the agreement reached between Republicans and Democrats to raise the national debt ceiling, which President Joe Biden signed into law in early June.
Instead of voting in favor of raising the borrowing limit, Republicans demanded drastic cuts in federal spending. They called for the repeal of President Biden’s executive order granting student loan forgiveness, but the Biden administration refused to agree.
However, the agreement included a provision to formally end the moratorium at the end of August.
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Even before the deal, the Biden administration was arranging borrowers to start making payments by September.
“Emergency period is over and we are preparing to reopen for borrowers,” said the secretary of education. Miguel Cardona He recently told a Senate hearing.
The education ministry said borrowers will make their first post-suspension payments in October. Meanwhile, interest will start piling up on borrowers’ debts again on Sept. 1, the ministry said.
Kantrowitz said the exact due date depends on your account details.
“The repayment date will be at least 21 days after the loan statement is sent,” he said.
As the Biden administration seeks to get millions of Americans ready to start paying student loans again, there is one big unresolved issue that could make that preparation difficult. That is, most borrowers don’t know what to borrow in the fall.
That’s because the Supreme Court has yet to rule on the propriety of Mr. Biden’s plan to cancel up to $20,000 in student loans to borrowers. A decision is expected to be made later this month.
Kantrowitz estimates that about 37 million people will be subject to partial loan cancellations.
Kantrowitz estimates that 14 million people, about a third of those with federal student loans, will have their balances fully forgiven under the president’s program. As a result, these borrowers will no longer have to pay anything in October.
The education ministry said it plans to “rewrite” borrowers’ low-value debt for those who still have balances after the bailout. It’s a weird term that means recalculating people’s monthly payments based on the bottom tab and the number of months left on the repayment schedule.
Kantrowitz gave an example. Suppose there is a person who currently owes him $30,000 in student loans at an interest rate of 5%.
Before the pandemic, I would have been paying about $320 a month over a 10-year repayment term. If a pardon is granted and the person receives $10,000 in relief, the total balance will be reduced by one-third and the monthly payments will be reduced by one-third to about $210 per month.
Undersecretary of Education James Couval recently warned that delinquency and default rates could soar if the administration fails to get Mr. Biden’s loan forgiven.
Mr. Couvar said the borrowers most at risk of default are those whose balances will be completely wiped out by Mr. Biden’s policies.
“Unless the ministry grants a one-time student loan debt relief, we expect this group of borrowers to see higher default rates as they continue to be confused about what they owe,” Kvarr said. Stated.