The federal student loan pause is ending at the beginning of October, meaning borrowers will be required to start their monthly loan payments for the first time in more than three years.
The pause, which was extended multiple times under the Trump and Biden administrations, will finally expire this fall after Congress prohibited President Joe Biden from extending it again as part of the debt ceiling package.Here's what borrowers need to know before the pause ends in 12 days.Payments will be due starting Oct. 1, but not everyone will have the same due date.
Spring graduates do not have to make payments until the grace period ends, which is typically six to nine months after leaving school.Borrowers can expect the monthly payment to be the same as it was before the COVID-19 pandemic pause. Unless a borrower made optional payments or changes to their account, such as consolidating loans, their payment amounts were essentially frozen.
Normally, a loan goes into default after a borrower fails to make a payment for 270 days, or nine months. Once in default, it can make buying a car or house more difficult. Borrowers could also see federal tax refunds or a portion of their paycheck withheld.Borrowers are automatically enrolled in a standard, 10-year replacement plan. However, there are several different repayment plans.
However, borrowers should be aware that if a repayment plan lowers monthly payments, it may increase how much is paid back over time due to interest and could also extend how long it takes to pay the loan off.
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