When Do Student Loan Payments Resume?
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• Updated May 15, 2023 with new lawsuit aiming to end student loan forbearance.
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Students may be off the hook for payments until as late as summer 2023, the U.S. Department of Education announced in November.
But forbearance could end sooner if the Supreme Court decides the fate of President Biden’s plan to cancel up to $20,000 in student debt per borrower before then.
On Feb. 28, the Supreme Court heard oral arguments from two cases challenging Biden's student debt relief plan. While the court has promised an expedited final decision, a resolution will likely take months.
Unless the president orders forbearance to be extended once more, the repayment clock starts again 60 days after the Education Department is allowed to implement the one-time debt cancellation or the litigation is resolved, or 60 days after June 30, 2023 — whichever comes first.
When exactly will payments resume?
We don’t know exactly when payments will resume. The Education Department’s announcement leaves forbearance’s expiration date up in the air, depending on when the Supreme Court weighs in on legal challenges circling Biden’s student debt relief plan.
If the Supreme Court rules on the lawsuit before June 30, 2023
If the Supreme Court rules on Biden’s plan before June 30, borrowers with remaining balances will need to start repaying loans 60 days after the court decision, at which point interest will also start accruing again.
If the Supreme court does not rule before June 30, 2023
If the Supreme Court has not made a decision on Biden’s debt cancellation plan by June 30, forbearance will end. Borrowers will need to start repaying loans 60 days after June 30, at which point interest will also start accruing again.
What about the SoFi lawsuit?
On March 3, private student loan lender SoFi Bank sued Secretary of Education Miguel Cardona and the Department of Education to end the federal student loan forbearance, saying that the latest forbearance extension was "unlawful on multiple grounds" and has cost the bank millions in profits due to borrowers not refinancing during the payment pause. As of mid-May, there was no court date set in the case.
It's not the only group suing to end the payment pause. A "free market" think tank called The Mackinac Center for Public Policy — backed by the New Civil Liberties Alliance — filed a lawsuit in April, calling the pause an "enormous expense to taxpayers" in a Michigan U.S. district court document. And on May 11, the group filed a preliminary injunction asking a Michigan judge to force an immediate payment restart.
What does the payment pause do?
During forbearance, first ordered by then-President Donald Trump in March 2020 as the COVID-19 pandemic took hold, federal student loan borrowers are allowed to skip payments. The interest rate on their loans has been set to 0%, and collections activities have been halted on defaulted loans.
Borrowers in standard repayment plans will find their previous loan balances waiting for them when payments resume, minus any debt cancellation that survives court challenges. Those in income-driven repayment plans, which cancel remaining debt once a certain number of payments has been made, are somewhat better off; each month that passes in this payment pause still counts toward their totals.
The November announcement marked the ninth time the government has extended interest-free forbearance, according to an Education Department spokesperson, most recently from a previous Dec. 31, 2022 expiration date.
Roughly 40 million borrowers who were supposed to start paying their bills again in January now have additional time without them. But after nearly three years without student loan bills and an uncertain future for cancellation, however, not everyone should continue the payment holiday.
Should you make payments during the extension?
The decision to start repaying during forbearance depends on your remaining balance and ability to pay.
If your cancellation amount under the stalled Biden plan would wipe out your student loans, don’t make payments during this extension. Instead, put your student loan bill money aside, if you’re able. This money should be kept in a separate account so it doesn’t get mixed into your normal expenses and is available for you to make a lump-sum payment if cancellation never comes to fruition.
Borrowers enrolled in a forgiveness program — like Public Service Loan Forgiveness — will see their payment count increase each month, whether or not a payment is made. These borrowers should not make payments.
Borrowers who will still have a student loan balance if cancellation is applied should make payments during the pause extension, if they can. Using this time to make payments will get you closer to the finish line sooner and more cheaply.
Whether or not Biden’s broad debt cancellation plan survives, you’ll still have loans to pay back. All money you pay toward your loans until forbearance ends in 2023 will go toward your loan principal. Even partial payments help.
Start planning for repayment now
Regardless of how you handle the remaining forbearance period, start preparing for repayment now. The pause could end sooner than June 30 if the Supreme Court rules on Biden’s debt cancellation plan before then.
“Practice making these payments now,” says Kristen Ahlenius, director of education at Your Money Line, a workplace financial wellness company. “Take the equivalent of what you would pay toward your student loans and use these funds to increase your emergency fund or pay off some other liabilities. You'll be prepared in case student loan forgiveness remains struck down and improve your financial health in the interim.”
Call your loan provider to confirm what your monthly payments will be. This amount could decrease if cancellation happens, but it’s best to plan for the worst.
If you won’t be able to cover the full amount, ask about enrolling in an income-driven repayment plan. These plans cap your monthly payments at a certain percentage of your disposable income, lowering them to a more manageable amount while also extending the life of your loan. If your income is low enough, your payments could be $0. A revised IDR plan is expected to roll out later this year, with even more generous terms.
A previous version of this article misstated the name of Your Money Line, a financial wellness company. It has been corrected here.