How Student Loans Will Work When Student Loan Payments Restart

President Joe Biden (Photo by Drew Angerer/Getty Images)

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Here’s what the return of student loan payments means for your student loans.

Here’s what you need to know.

Student Loans

After 22 months of unprecedented student loan relief, federal student loan payments will restart beginning February 1. Since March 2020, student loan borrowers have received several student loan benefits, including:

  • no mandatory federal student loan payments;
  • 0% interest on federal student loans;
  • no collection of student loans in default.

Effective January 31, 2022, this temporary student loan forbearance will end, and more than 40 million student loan borrowers will restart student loan repayments. (No, Biden won’t extend student loan relief again). Here are 7 things you need to know:

1. Which student loans are affected by the end of student loan relief?

This student loan relief only impacted federal student loans. Therefore, beginning February 1, 2022, you will need to make monthly federal student loan payments again. Temporary student loan relief due to the Covid-19 pandemic didn’t apply to private loans. Beginning February 1, 2022, you would make both private and federal student loan payments as you did before the Covid-19 pandemic. (Why Biden ended student loan relief).

2. What is my new interest rate?

Beginning in March 2020, federal student loans temporarily had a 0% interest rate. This means that no new interest accrued on your federal student loans during the temporary student loan forbearance period. Private loans didn’t have this benefit. Beginning February 1, 2022, your student loans will include their regular interest rate that you had before the Covid-19 pandemic. (Don’t expect Biden to cancel student loans before student loan relief ends). Since federal student loans today have a fixed interest rate, you should have the same interest rate that you had in March 2020. That said, some older federal student loans had a variable interest rate, so if you have an older federal student loan, your interest rate may have changed.

3. When is my student loan payment due?

Your student loan payment isn’t necessarily due on February 1, 2022. Rather, your federal student loan payments will be due starting February 1. Therefore, each borrower will have a specific due date. Check your student loan statement to confirm the due date or contact your student loan servicer for more details.

4. Who is my student loan servicer?

Your student loan servicer is the company to whom you make student loan payments. Most student loan borrowers will have the same federal student loan servicer that they had prior to the Covid-19 pandemic. Your private student loan servicer may be the same or different company. That said, approximately 16 million student loan borrowers will get a new federal student loan servicer in 2022. This includes Navient, one of the leading student loan servicers, who is exiting federal student loan servicing. If your federal student loan servicer is changing, the U.S. Department of Education will send you written correspondence detailing the change and informing you about your new student loan servicer. You can also check your Federal Student Aid (FSA) account to confirm your student loan servicer. (Here’s a list of everyone who wants Biden to extend student loan relief).

5. Does the end of student loan relief affect student loan forgiveness?

Yes, the end of student loan relief may impact student loan forgiveness. (How to qualify for automatic student loan forgiveness). The good news is that student loan forgiveness and student loan cancellation are still available. This includes student loan forgiveness through public service loan forgiveness, for example, or student loan cancellation through borrower defense to student loan repayment, for example. That said, during the 22-month period of temporary student loan forbearance, the U.S. Department of Education “counted” non-payments of federal student loans for purposes of student loan forgiveness. This includes for both income-driven repayment plans, which require 20 to 25 years of monthly student loan payments, and public service loan forgiveness, which requires 120 monthly student loan payments. Beginning February 1, 2022, student loan borrowers will need to make federal student loan payments to get “credit” toward these monthly payment requirements.

6. What if I can’t afford my student loan payments?

If you can’t afford your student loan payments, you have several options. Contact your student loan servicer for details. For federal student loans, you could explore forbearance or deferment. However, interest may accrue on your student loan balance, even if you’re not making student loan payments. A better alternative is an income-driven repayment plan such as IBR, PAYE, REPAYE or REPAYE, which will set your monthly student loan payment based on your discretionary income, family size and state of residence.

7. How can I get a lower interest rate on my student loans?

The best way to get a lower interest rate on your student loans is through student loan refinancing. Student loan refinancing helps you get a lower rate for private and federal loans, and also can lower your monthly student loan payment. Rates start at 1.74% now, and you can choose a fixed or variable interest rate.

To qualify, you should be employed or have a signed job offer, have stable monthly income to pay student loans and other living expenses, and at least a 650 credit score. When you refinance student loans, the resulting loan is a private loan. So, if you’re pursuing any federal repayment plans or benefits such as income-driven repayment or public service forgiveness, for example, you may want to refinance only your private loans. However, some borrowers prefer to refinance both private and federal loans. It depends on your unique situation.

The end of temporary student loan relief doesn’t have to be scary. The most important part is to understand all your options and have a clear strategy. Here are some popular ways to save money and pay off student loans faster:

Student Loans: Related Reading

Biden confirms end of student loan relief

Biden won’t cancel student loans before student loan relief ends

How to qualify for automatic student loan forgiveness

Education Department will cancel $2 billion of student loans