5 Steps to Take as Student Loan Payments Restart

After a long hiatus for most borrowers during the pandemic, monthly bills are back

John Waggoner,

AARP

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En español

Published September 15, 2023

/ Updated October 02, 2023

The concept of student loans illustrated by a graduation cap sitting on an open book next to a pencil and a stack of gold coins.

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October is here, and soon the leaves will turn color, everything will smell like pumpkin spice, and the payments on your student loan debt will return to full bloom.

Student loan payments were halted in March 2020 as the COVID-19 pandemic raced across the country. The repayment restart date has been moved many times, but there wasn't another postponement this time. Fortunately, interest hasn’t built up on loans during the moratorium.

If the loan moratorium helped you make ends meet, that’s great. If it helped you save up for the restart, even better. In any event, you’ll need a checklist to make sure you pay your loan on time.

What to do now

1. Update your information

Start by updating your contact information at StudentAid.gov, the federal student aid website. If you’ve moved, you’ll still owe your student loan payment, even if the bill from your servicer gets lost in the mail. The first bill due in October should have gone out at least 21 days before the due date.

You should also update your information with your student loan servicer. If three-plus years of no payments made the name of your servicer slip your mind, you can look it up at StudentAid.gov.

2. Consider other repayment plans

Income-driven repayment (IDR) plans, which base payments on a percentage of your income, may be more affordable than the plan you have now. Several IDR plans are available, including the new Saving on a Valuable Education (SAVE) plan.

Under the SAVE plan, the amount of income shielded from payments will rise from 150 percent of the federal poverty guidelines to 225 percent. Adjusted gross income (AGI) above that level is considered discretionary income. AGI is your income minus a few deductions, such as educator expenses, student loan interest, alimony payments or contributions to a retirement account.

If you need help navigating student loan repayment options and programs, consider getting a free assessment of your options using the Savi Student Loan Repayment tool.

Payments under the SAVE plan will be 5 percent of discretionary income on undergraduate loans, down from 10 percent for the current Revised Pay As You Earn (REPAYE) plan, which is being replaced by the SAVE plan. Graduate loans will remain at 10 percent of discretionary income.

According to the Department of Education (DOE), a single borrower who earns less than $32,805 a year ($67,500 for a family of four) will not have to make payments. DOE estimates that more than 1 million low-income borrowers will qualify for zero monthly payments.

Monthly payments for higher earners will be reduced depending on income and family size. One other benefit of the SAVE plan: If your payment doesn’t cover your loan interest, the remaining interest won’t be tacked on to your principal. DOE estimates this will benefit 70 percent of borrowers with IDR plans.

The SAVE plan is available to student borrowers with a Direct Loan in good standing. Some other types of student loans can be consolidated into a Direct Loan to become eligible for the SAVE plan. If you are already on a REPAYE plan, you will be enrolled in the SAVE plan automatically. Apply for all IDR plans at StudentAid.gov.

3. Explore loan forbearance or forgiveness

You can still get loan forbearance or forgiveness under certain conditions. Forbearance means that you can put off payments for a specific period, even though interest will still accrue on the loan. Forgiveness means your debt is erased. Check with your loan servicer for options that may be available to you.

Student Loans: Not Just a Problem for the Young

Americans owe a record $1.6 trillion of student loan debt, far more than the $1 trillion they owe in credit card debt (which is also a record). Student loan debt isn’t only a problem for people who just finished college: As of the end of June 2023, about 9 million older borrowers held 25 percent of all student loan debt, totaling $390.3 billion.

Borrowers ages 50 to 59 owe $239.4 billion in student loans
Borrowers ages 60 to 69 owe $117.5 billion
Borrowers 70 and older owe $33.2 billion

For example, if you are a teacher at a low-income elementary school, secondary school or educational service agency and teach five consecutive academic years, you may be eligible for Teacher Loan Forgiveness of up to $17,500. This applies to Direct subsidized and unsubsidized loans as well as subsidized and unsubsidized federal Stafford Loans.

Full-time government workers and nonprofit employees can investigate the Public Service Loan Forgiveness (PSLF) program. Typically, you must have made 120 consecutive payments (not including the pandemic student loan payment pause) to be eligible. Those in income-driven repayment plans can get forgiveness after 20 or 25 years. (Note for teachers: You can’t apply for loan forgiveness through both the Teacher Loan Forgiveness program and the PSLF program for the same period of teaching.)

Video: Pay Off Student Loans With Help From These Tips

4. Assess your debts

About a third of federal student loan borrowers who had their payments paused during the pandemic didn’t save the money. Many borrowers who had their payments paused were not able to save that money and may face difficulty making their loan payments.

This is a good time to create a budget and examine your income and expenses. AARP has several free resources for making and managing a budget. Don’t take on any new debt before you determine whether your budget can absorb the resumption of student loan payments. Even reduced payments may make it difficult to handle your other debt as payments resume, particularly for married couples who each have their own student loans.

5. Consider enrolling in autopay

If you allow your loan servicer to take out your loan payment from your bank account every month, you’ll save 0.25 percentage points off your loan. It’s not a lot, but every bit helps. And, provided you have enough money in the bank when the bank taps your account, you’ll avoid late-payment penalties. The Department of Education says that even if you had enrolled previously in autopay, you may need to reenroll.

What if I can’t make payments?

Contact your loan servicer to understand your options and the consequences of missed payments. If it turns out you’re eligible for an IDR, for example, your monthly payments could be reduced to a more affordable level or eliminated if you meet the eligibility criteria.

Keep in mind there’s a special “on-ramp” period through September 2024 for borrowers who are starting to repay their loans. During that period, borrowers who miss payments will not get a delinquency reported to credit bureaus. Interest will continue to accrue, however.

Missed payments will not count toward loan forgiveness, either through an IDR plan or a forgiveness plan. You do not need to request or enroll in the on-ramp period. If your loans were eligible for the payment pause, you are automatically eligible for the on-ramp.

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John Waggoner is a contributing writer of all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously, he was a reporter for Kiplinger’s Personal Finance and USA Today and has written books on investing and the 2008 financial crisis. Waggoner’s USA Today investing column ran in dozens of newspapers for 25 years.