Federal Student Loan Payments Restart October 2023: What Borrowers Need to Know

The federal student loan payment pause, implemented due to the COVID-19 pandemic, is ending after over three years.

Starting October 1, 2023, borrowers must resume making payments on federal student loans. Interest, which has been suspended since March 2020, will start accruing again on September 1, 2023. This pause was initially enacted to ease financial strain during the pandemic.

In June 2023, the U.S. Supreme Court struck down President Biden's student loan forgiveness program, which aimed to reduce debt for millions. In response, the White House introduced the SAVE (Saving on a Valuable Education) plan to assist borrowers facing financial difficulties.

Essential Points to Remember

• Federal student loan payments are due again starting October 1, 2023.
• Interest charges will resume on September 1, 2023, after being frozen since March 2020.
• The Biden Administration’s new SAVE plan offers reduced payments and loan term relief.
• Eligible borrowers can benefit from smaller monthly payments and potential loan forgiveness.
• The SAVE plan application will be available in fall 2023 on the official Federal Student Aid website.

Background on the Student Loan Payment Freeze

On March 13, 2020, under an executive order from then-President Trump, the Federal Student Aid office halted federal student loan payments, stopped collections on defaulted loans, and set interest rates to 0%. This affected loans through the Federal Direct Loan, FFEL, Perkins, and HEAL programs.

Congress codified this in the CARES Act, initially through September 30, 2020, with multiple extensions extending the freeze until now.

The End of Loan Forgiveness and Introduction of SAVE

President Biden's initial plan aimed to forgive up to $10,000 in student loan debt for borrowers earning under $125,000 annually, with an additional $10,000 for Pell Grant recipients. This would have benefited approximately 40 million Americans.

However, the Supreme Court ruled the forgiveness program unconstitutional in June 2023, halting its implementation.

On the same day, the Biden Administration launched the SAVE plan, designed to ease repayment burdens for eligible borrowers by lowering monthly payments and shortening repayment periods.

Key Features of the SAVE Plan

• Undergraduate loan payments cut from 10% to 5% of discretionary income.
• Loans under $12,000 forgiven after 10 years of payments instead of 20.
• Interest calculations adjusted to prevent loan balances from growing.
• Protections for very low-income borrowers against default consequences.

Applying for SAVE Relief

The SAVE plan application will be accessible by fall 2023 on the Federal Student Aid website. Borrowers currently enrolled in the REPAYE plan will be automatically transitioned to SAVE.

FAQs

Is student loan forgiveness still available?

No. The Supreme Court’s June 2023 ruling ended the Biden Administration’s student loan forgiveness program.

If I was approved for forgiveness before, will I still receive it?

No. The ruling effectively canceled all approved forgiveness under the previous program.

What if I can’t afford payments starting October 2023?

The SAVE plan offers options to reduce or pause payments for eligible borrowers. Applications will open later in 2023.

Summary

After a prolonged pause, federal student loan payments and interest charges resume this fall. Though the original forgiveness plan was blocked, the SAVE program offers meaningful relief for borrowers struggling with repayment. Borrowers should stay informed and apply for SAVE when available to manage their student loan debt effectively.

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