Federal Student Loan Payments and Interest Set to Resume in September

After months of speculation, the Department of Education under President Biden’s administration has confirmed that the pandemic-related suspension on federal student loan payments will expire soon. Starting from September 1, 2023, student loan interest will resume, and payments will be due beginning in October.

The pause on federal student loan payments and the reduction of interest rates to 0% were initiated in March 2020 when President Donald Trump signed the CARES Act in response to the COVID-19 pandemic. Since then, the Biden administration has extended the student loan pause multiple times. However, with the improving economic situation and the reopening of various sectors, the Department of Education has decided to end the suspension.

The Department of Education assured borrowers that they would be notified well in advance before payments restart. This announcement marks an important milestone as borrowers prepare to resume their regular repayment obligations.

President Biden, who is currently running for re-election, has proposed a plan to forgive up to $10,000 in federal student loan debt, with an additional $20,000 for those who received Pell Grants. However, this plan is facing legal challenges. If successfully implemented, it could eliminate a total of $441 billion in student debt for over 40 million borrowers, according to the Federal Reserve Bank of New York.

Education Secretary Miguel Cardona had previously stated that the administration intended to reinstate normal debt repayment expectations approximately 60 days after a Supreme Court ruling. In the absence of a prompt ruling, the administration is prepared to resume payments 60 days after June 30.

The impending resumption of federal student loan payments serves as a reminder for borrowers to review their financial situations and make appropriate arrangements for their future obligations. Exploring repayment options, seeking financial counseling, or considering loan consolidation may be beneficial for borrowers navigating their student loan repayments.

As the situation evolves, borrowers are advised to stay informed and anticipate any changes in federal student loan policies. The Department of Education will continue to provide updates and guidance to borrowers leading up to the expiration of the payment suspension.