When federal student loan payments finally restart in the fall, the Biden administration will offer borrowers some elbow room.
The U.S. Department of Education will institute a 12-month “on ramp” to repayment, which will run from Oct. 1, 2023, to Sept. 30, 2024. During that period, borrowers will be shielded from the worst consequences of missed payments.
Borrowers may need that leeway: The Consumer Financial Protection Bureau recently warned that roughly 1 in 5 student loan borrowers could struggle when their payments resume.
Here’s what to know.
President Joe Biden announced the provision easing borrowers back into repayment on Friday afternoon, hours after the Supreme Court struct down his student loan forgiveness plan.
Before the ruling, the Biden administration said that resuming student loan payments without being able to carry out its debt forgiveness could trigger a historic spike in defaults and delinquencies.
In an acknowledgement of the challenges that could lie ahead for borrowers, Biden said missing a payment won’t lead to many of the usual penalties for a year after the bills resume. In addition, the president said his administration would try to find another way to deliver on student debt forgiveness.
Higher education expert Mark Kantrowitz said, “The 12-month on-ramp is similar to a forbearance in many ways.” As is the case with a forbearance, interest will continue accruing on your debt while you don’t make payments. As a result, Kantrowitz recommend borrowers start repaying their bills, if they can.
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