What’s Happening with Student Loans After October 2024?

As the world transitions out of the COVID-19 pandemic, one major financial shift is coming for millions of student loan borrowers in the U.S. The pandemic-related student loan payment pause officially ended on September 1, 2023, and borrowers are now required to resume making payments by October 2023. Here’s a breakdown of what changes are expected after October 2024 and how borrowers can navigate them.

1. Payments Have Officially Resumed

After a long break, federal student loan borrowers are now obligated to begin repaying their loans. Interest on these loans started accruing again on September 1, 2023, and borrowers received their first billing statements in October 2023. For many, this resumption of payments could be a significant shift, especially if financial situations have changed during the pandemic.

2. Risk of Delinquency or Default

For those who cannot meet the repayment obligations, the consequences could be severe. Borrowers who don’t resume payments after the grace period may face delinquency or default, which could result in:

• Wage garnishment

• Negative impacts on credit scores

• Increased difficulty securing loans or credit in the future

To avoid this, it’s crucial for borrowers to explore repayment options or seek deferment if needed.

3. New Repayment Options: The SAVE Plan

To ease the transition, the U.S. Department of Education has rolled out new income-driven repayment (IDR) plans like the SAVE Plan (Saving on a Valuable Education). This plan, which replaces the previous REPAYE Plan, offers benefits such as:

• Lower monthly payments based on income and family size

• Potential loan forgiveness after a set number of years for some borrowers

The SAVE Plan is particularly helpful for individuals with lower incomes, as it prevents runaway interest from ballooning balances and offers more manageable payments.

4. Loan Forgiveness Programs Still Available

Borrowers may also still qualify for existing loan forgiveness programs, including:

• Public Service Loan Forgiveness (PSLF): For those working in public service, forgiveness can be achieved after 120 qualifying payments.

• Teacher Loan Forgiveness: Teachers in low-income schools may qualify for forgiveness after five years.

• Income-Driven Repayment (IDR) Forgiveness: After 20 or 25 years of payments under an IDR plan, remaining balances may be forgiven.

It’s essential to understand which program applies to your situation and ensure you’re meeting all the criteria to benefit from these forgiveness options.

5. Future Student Loan Reform Proposals

The student loan landscape could continue to evolve, as the Biden administration remains committed to alleviating student debt. While the Supreme Court blocked the broader student loan forgiveness plan, the administration is pursuing other avenues to reduce the burden on borrowers. Further reforms could introduce new relief options, but for now, borrowers should stay informed and act based on current policies.

Final Thoughts: Staying Ahead of the Changes

For those affected by the resumption of student loan payments, it’s essential to be proactive:

• Review your repayment plan and explore whether the SAVE Plan or another IDR plan is right for you.

• Stay up-to-date on deadlines and make sure you’re aware of any grace periods or new repayment options.

• Seek assistance if you’re struggling to meet payment obligations. Many loan servicers and financial institutions are offering resources to help borrowers navigate these changes.

By staying informed and understanding your options, you can better manage your student loans and avoid potential financial pitfalls as the system transitions back to normalcy.

Sources:
Fox Business​(Fox Business)
NCUA​(NCUA)