The U.S. Department of Education has confirmed when federal student loan repayments and interest accrual will restart this fall.
Borrowers can plan for interest to begin accruing again on their loans on Sept. 1, with payments due starting in Oct. A spokesperson told The Washington City Times the department would “be in direct touch with borrowers and ramping up our communications with servicers well before repayment resumes.”
There has been a moratorium on payments and interest accrual since the start of the COVID-19 pandemic more than three years ago. Though some borrowers had hoped President Joe Biden’s administration would once again extend the payment pause, part of the debt ceiling legislation recently signed into law included a Republican provision to terminate the moratorium.
One of the reasons borrowers hoped the payment pause would be extended again is the uncertainty surrounding Biden’s plan to forgive up to $20,000 in federal student loan debt for most borrowers. After multiple legal challenges, the future of the plan rests with the U.S. Supreme Court. A decision is expected by the end of this month.
“We recognize that the return to repayment would result in significant financial hardship for many borrowers,” said the Education Department spokesperson. “That is why this [a]dministration also put forward a plan to provide up to $20,000 in debt relief for hard-working Americans recovering from the economic harms of the pandemic.”
Economists and other financial experts have said many borrowers are likely to struggle once payments resume. Financial firm Jeffries has warned of a “student loan cliff” in which households will pull back on other spending once their student loan bills are due, having a “notable” impact on overall U.S. economic growth.
Jeffries estimates federal student loan payments will cost an estimated 45 million borrowers around $18 billion per month. The Committee for a Responsible Federal Budget estimated the pause saves borrowers about $5 billion per month in interest.
The Education Department has instituted a number of other changes to ease some borrowers’ debt burden, including introducing a new income-driven repayment plan and improving the Public Service Loan Forgiveness program.
“In spite of our opponents’ best efforts to sabotage our work to support student borrowers, we are fully committed to helping borrowers successfully navigate the return to repayment with the pandemic now behind us,” the department spokesperson said.