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TISLA in the News


Student loan repayments are back. Here’s what that could mean for the economy

The Trump and Biden administrations enacted and then expanded a pandemic-related pause for about 44 million borrowers by freezing their accounts and restricting interest accumulation. But Congress ruled, as part of the debt ceiling package that it passed in June, that the relief program can no longer be extended. Payments resumed on October 1 for the first time since March 2020.

Before the pandemic, the federal government was collecting about $5.8 billion in payments each month. A recent report from the Wall Street Journal estimated that the restart could pull more than $100 billion from consumers’ wallets this year alone.

Before the Bell spoke with Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, to talk about what that could mean for the economy.


Yes, you are still responsible for paying your student loans during a government shutdown

The SAVE plan was designed to reduce borrowers’ monthly payments by half, allow many borrowers to make $0 monthly payments and ensure borrowers don’t see their balances grow from unpaid interest, according to the White House.

The Education Department has also created a temporary on-ramp transition period if you’re unable to make payments right away when they resume in October. You don’t need to request or enroll in the on-ramp period if your loans were eligible for the payment pause.

During the on-ramp transition period, payments are still due, and interest will continue to accrue, but borrowers who fail to pay will not be reported as delinquent to national credit reporting agencies. The on-ramp transition period runs from Oct. 1, 2023, to Sept. 30, 2024.

“This on-ramp period protects borrowers from having a delinquency reported to credit reporting agencies. This prevents the worst consequences of missed, late or partial payments,” Federal Student Aid says on its website.

In an email, TISLA president Betsy Mayotte told VERIFY “it’s important for borrowers to know that even though they aren’t reporting delinquencies during the on-ramp, not paying could still end up negatively impacting their credit.”


Payments for student loans are starting again. Here’s what you need to know

Mayotte says the best thing borrowers can do right now is educate themselves about what student loan repayment options exist, understand those different options, how they work and prioritize paying the least amount over time. She warns that it’s easy to get caught up in the possibility of loan forgiveness, as it’s an attractive and popular topic. “For some people, pursuing a loan forgiveness program is the way to pay the least amount over time. But for most other borrowers, it’s going to be paying their loans off as aggressively as possible to reduce total interest costs,” she said.


When do student loan payments resume?

“The President had the authority to extend the pause because we were in a national emergency,” Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, a nonprofit organization offering free student loan advice, told MarketWatch Picks. “Part of the debt ceiling agreement is that he wasn’t going to extend the pause anymore. It’s hard to say the economy is improving and that people can’t afford to pay their loans.”

Student loans will once again begin accruing interest on September 1, and borrowers will have to resume payments in October.


When do student-loan payments resume? Here are 6 tips to get ready.

Confusion and the launch of many new programs are some of the reasons why advocates, borrowers and servicers have been bracing for years for the challenges that resuming payments on this scale will pose to the student loan system.

When payments have restarted after smaller, more limited freezes, borrowers fell into delinquency and default at elevated rates. Now, tens of millions of borrowers will be seeking help with their student loans all at once, amid servicer cuts to staff and customer service hours.

“No matter how much prep or money the Department of Education and the servicers had, the system wasn’t built for 40 million people all resuming repayment at the same time,” said Betsy Mayotte, the founder of the Institute of Student Loan Advisors.


Thinking about attending college? Here’s what you should know about student loans

Before you accept your student loan offer, regardless if it’s federal or private, you want to make sure you understand the details, said Betsy Mayotte, president of The Institute of Student Loan Advisors. Those include when interest accrues, if interest is capitalized and if there are any late fees.

If reading the details on your own feels daunting, Mayotte recommends speaking with a financial aid counselor, either at your university or elsewhere.

If you meet with a counselor, it’s good practice to come with prepared questions about repayment programs for when you need to start paying back your loan.


What to know about student loan repayment and forgiveness | Part 3