Student Loan Repayment Will Restart In September – Yes, Really This Time

The Fiscal Responsibility Act of 2023, also known as the debt ceiling deal, requires the U.S. Department of Education to restart student loan repayment on federal student loans in September 2023. Yes, repayment is really going to restart in September. For real. Seriously! You can count on it happening. No kidding!

This legislation passed the U.S. House of Representatives with bipartisan support on May 31, 2023 by a vote of 314-117 and the U.S. Senate on June 1, 2023 by a vote of 63-36. The President signed it into law on June 3, 2023, avoiding a default on the national debt. 

The payment pause and interest waiver will end and interest on federal student loans will begin in September 2023 - with the first official payments due in October 2023. This really isn't a change from plans previously announced by the Biden administration, but it does prevent further extensions without an Act of Congress. It also prevents the use of an indefinite extension to the payment pause as an alternative to forgiveness if the Biden administration loses its case before the U.S. Supreme Court. 

Eight Past Extensions To The Payment Pause And Interest Waiver

The original payment pause and interest waiver was announced by President Trump on March 13, 2020 and enacted by the CARES Act on March 27, 2020. It was set to expire on September 30, 2020. 

It was subsequently extended a total of eight times, through December 31, 2020, January 31, 2021, September 30, 2021, January 31, 2022, May 1, 2022, August 31, 2022, December 31, 2022 and 60 days after June 30, 2023. The last extension was announced by the U.S. Department of Education in a press release published on November 22, 2022.

The last extension might end earlier, if the U.S. Supreme Court resolves the lawsuits blocking the President’s student loan forgiveness plan before June 30, 2023. The U.S. Supreme Court has mostly been publishing opinions on Thursdays since the start of May. This suggests that the court might issue an opinion on the legality of the President’s plan on June 8, 15, 22 or 29, leading to a restart of repayment 60 days later. 

In practice, however, it seems likely that the U.S. Department of Education will restart repayment in October. Technically, 60 days after June 30, 2023 will occur on August 29, 2023, since there are 31 days in July. But, it is easier to have repayment restart during next month, rather than two days before the end of the month, since payment due dates are distributed throughout the month. 

The U.S. Department of Education previously told the student loan servicers to plan for a restart of repayment in September 2023. 

Federal Government Cried Wolf Twice Before

Some borrowers might not believe that the U.S. Department of Education is really restarting repayment. After all, the U.S. Department of Education cried wolf twice before, identifying the fifth and seventh extensions as the "final" extension. 

However, the Fiscal Responsibility Act of 2023 requires the payment pause and interest waiver to end “Sixty days after June 30, 2023.” In addition, the law blocks further extensions to the payment pause and interest waiver without an Act of Congress. It prohibits the Secretary of Education from using any authority to implement an extension unless expressly authorized by Congress.

So, repayment of federal student loans really will restart in September.

The debt deal doesn’t affect the President’s student loan forgiveness plan. (The House and Senate passed resolutions to block the President’s plan under the Congressional Review Act might have, except the resolutions did not pass with a veto-proof majority.) The debt deal also does not affect the pending regulatory change to implement a new version of the REPAYE income-driven repayment plan.

Benefits Of The Payment Pause And Interest Waiver

By the time repayment restarts in October 2023, the payment pause and interest waiver will have lasted a total of 42 months (counting March 2020 as a full month).  

11 of the months were during the Trump administration and 31 during the Biden administration. There were two extensions during the Trump administration and six during the Biden administration.

During the 42-month pause, borrowers saved an average of about $5,000 in interest and about $15,000 in total payments on their federal student loans. 

The paused payments count toward Public Service Loan Forgiveness, representing more than a third (35%) of the 120 payments. The paused payments also count toward the 20- and 25-year forgiveness at the end of income-driven repayment plans. 

The end of the payment pause and interest waiver also ends the moratorium on the collection of defaulted student loans. However, the 7.5 million borrowers who were in default before the pandemic can now qualify for the Biden Administration's Fresh Start initiative. The Fresh Start initiative provides defaulted borrowers with a clean slate by removing the default from their credit history and restoring eligibility or federal student aid. To qualify, the borrower must start repaying their federal student loans within the 12-month period after the restart of repayment. 

What To Do When Student Loan Repayment Restarts

Student loan repayment is going to restart for federal student loan borrowers in October of 2023. Interest will start accruing on federal student loans on September 1, 2023, since 60 days after June 30 means that the payment pause is officially over on August 29, 2023.

The student loan servicers will send out at least six notices during the 60-day period before repayment restarts. 

Nevertheless, there may be a lot of confusion when repayment restarts. Some borrowers will miss the restart of repayment, just like some borrowers miss the start of repayment after the end of the six-month grace period after graduation. 

Update your contact information with the loan servicer and on StudentAid.gov. This will ensure that you receive the notices about the restart of repayment, such as your due date and monthly payment amount.

Some borrowers will call their loan servicers at the last minute, clogging the servicers’ call centers in late August and early September. Congress did not appropriate funding requested by the U.S. Department of Education to cover the cost of expanding call center hours and increasing call center staff. 

If you have questions and don’t like waiting on infinite hold, call your loan servicer now, instead of waiting until the last minute. Or send your questions by secure email on the loan servicer’s website. 

Sign up for autopay, where the monthly payments are automatically transferred from your bank account to the loan servicer. This will ensure that the correct payment is made on time, even if you can’t get through to the loan servicer. As an added benefit, loan services provided a 0.25% percentage point interest rate reduction as an incentive, so you will save some money too.

Spending has a tendency to increase to consume all available income, so it may be challenging to carve out enough money from your budget to make the student loan payments. Start by creating a descriptive budget, where you track all of your spending for a month. Tag each expense as mandatory (need) vs. discretionary (want). This will help you identify the spending you can cut. 

If you are unemployed or struggling financially, there are several options for continuing a personal pause (but not an interest waiver) when repayment restarts. These include the economic hardship deferment, unemployment deferment and general forbearances, each of which is limited to a maximum of 3 years of total duration. Interest may continue to accrue during a deferment or forbearance.

Another option is to use an income-driven repayment plan. If your income is less than 150% of the poverty line, the monthly payment will be zero under IBR, PAYE and REPAYE. (Starting on July 1, 2024, the threshold will increase to 225% of the poverty line for borrowers in the updated REPAYE plan.)