Will Federal Student Loan Payments Resume In 2023? Maybe, Maybe Not
If you have federal student loan debt, it’s highly likely you haven’t made any payments since March of 2020. After all, payments on federal student loans were paused due to the Covid-19 emergency and interest rates were locked at 0%. This initial pause has been extended multiple times since, with the current extension ending when the litigation surrounding President Biden’s student loan forgiveness plan reaches a conclusion.
According to the U.S. Department of Education, payments on federal student loans will restart 60 days after that happens — or maybe, possibly sometime after that.
“If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023 — payments will resume 60 days after that. We will notify borrowers before payments restart,” writes the U.S. Department of Education on its website.
So, in other words, you may get $10,000 to $20,000 in student loan debt forgiven as Biden promised, or you may not, but you will probably end up restarting your student loan payments sometime in 2023.
That’s helpful, but is it really? The pause on federal student loan payments has been extended seven times in total so far, and student loan expert Mark Kantrowitz recently pointed that the Biden administration previously said the fifth and seventh extensions were the “final” ones borrowers would see.
Should we really believe them? According to Kantrowitz, who is a Forbes contributor and the author of a range of student loan policy papers, says there are several signs payments may actually resume this year… at least, probably.
Why Payments Will Probably Resume This Year
First, it’s been in the news that the Biden administration is officially ending the national emergency declaration caused by Covid-19 on May 11, 2023. The end of the pandemic era public health emergency means an end to some of the powers the federal government has had regarding benefits payments and student loans, among others.
This also means the Biden administration may not have the option to keep extending the student loan payment pause forever.
“That potentially ends the justification for using the Heroes Act of 2003 to implement the payment pause and interest waiver,” said Kantrowitz, adding this might prevent the administration from using a further extension of the payment pause and interest waiver as Plan B if they lose their case in the U.S. Supreme Court.
Kantrowitz also notes that the U.S. Department of Education published the Notice of Proposed Rulemaking (NPRM) for the new income-driven repayment plan in the Federal Register with a 30-day public comment period. “That prevents them from modifying income-contingent repayment into a new, broader student loan forgiveness plan as Plan C if the U.S. Supreme Court blocks the President’s plan,” he said.
In other words, this move ensures the Biden administration can’t easily come up with a new forgiveness plan altogether and start the process over if they lose their Supreme Court case.
A Long Shot Extension
However, we’ve heard the “final” phrase before. It’s possible the Biden Administration does one last extension before May – potentially changing the date of June 30, 2023 to something farther down the road.
Given that restarting payments, enacting a new repayment plan, and potentially enacting loan forgiveness could be a logistical nightmare for the student loan servicing companies, it might make logistical sense to plan for restarting payments at a later date.
Not Ready To Resume Payments? Consider These Tips
Not knowing whether you’ll be faced with restarting your payments on federal student loans this year can be stressful. After all, it’s hard to prepare to make payments when you don’t know when they’ll start, and perhaps even what your new payment will be if you get $10,000 or $20,000 in federal student loan debt wiped away per the Biden forgiveness plan.
That said, there are some steps everyone can take to mentally, financially, and logistically prepare for the inevitable.
- Update your contact information with the loan servicer and on StudentAid.gov. Kantrowitz suggests taking this step now since updating your contact information means you’ll get notification when payments are set to resume. If you haven’t made any payments since March of 2020, there’s also a good chance your contact information is outdated.
- Sign up for autopay with the loan servicer, where the monthly loan payments are automatically transferred from your bank account to the lender. Kantrowitz says borrowers should do this even if they are already signed up for autopay, “to confirm that their bank account information has not changed or to update it if they have switched to a new bank.”
- Start a monthly budget. Also prepare a descriptive budget, where you track all spending for a month, assigning it to broad categories like food, housing, medical, transportation, taxes, insurance, and more, says Kantrowitz. “Increasing awareness of spending patterns is the first step in exercising restraint,” he said, adding that budgeting also helps borrowers carve out room in their budget for the student loan payments.
- Get in the habit of making payments. Finally, Kantrowitz says to start saving the amount of your loan payments each month so you get back in the habit. “The savings can be used as a lump sum payment when repayment restarts, or to build or bulk up their emergency fund, or to pay down higher-interest debt.
The Bottom Line
Will federal student loan repayments finally resume in 2023? While most signs point to “yes,” you can guess that anything could happen with student loans at this point.
For most people, you should hope for the best and plan for the worst. This means getting ready to begin making payments again.
Chances are high that, come later in 2023, individuals with federal student loans will not have $10,000 to $20,000 forgiven and will face student loan payments restarting.