When Do Student Loan Payments Resume?

The White House has extended payment forbearance into 2023. With forgiveness in doubt, use this extra time wisely.

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The White House has once again extended the federal student loan payment pause as it battles lawsuits threatening to derail its sweeping student debt forgiveness plan.

Students may be off the hook for payments until summer 2023, the Department of Education said Nov. 22. But forbearance could end sooner if the Supreme Court decides the fate of Biden’s plan to cancel up to $20,000 in student debt per borrower.

This marks the eighth time the government has lengthened interest-free forbearance, though the Biden administration had insisted Dec. 31 would mark the final expiration date.

“Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations, and it’s just plain wrong,” Secretary of Education Miguel Cardona said in a statement.

Unless the president orders forbearance to be extended once more, the repayment clock starts again 60 days after the department is allowed to implement the program or the litigation is resolved, or 60 days after June 30, 2023 — whichever comes first.

The extension is a win for activists and borrowers who called on the Biden administration to extend forbearance after several legal challenges put the student debt cancellation plan on hold.

“We applaud President Biden for extending this pause on student loan payments now and for affirming his intent to cancel student debt in the months ahead,” Mike Pierce, executive director of the Student Borrower Protection Center, said in a statement.

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.

Roughly 40 million borrowers who were supposed to start paying their bills again in January now will get additional time without them. After nearly three years without student loan bills and an uncertain future for cancellation, however, not everyone should continue the payment holiday.

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 if and 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.

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.

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.

It comes down to basic math, explains Dave Christensen, a Wisconsin borrower who paid off about $30,000 in student loans during the pandemic pause. “They aren’t charging you interest, so take advantage and your balance goes down a lot quicker that way,” he says.

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.

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