What you need to know about student loan forgiveness and repayment
After five extensions, three years and two presidents, the student loan repayment pause is ending. Repayments are set to begin again as soon as October, with interest resuming in September.
Here’s what you need to know
- Student loan interest accrual will resume on September 1, 2023, and payments will restart in October. Congress recently passed a law preventing further extensions of the payment pause, but they are allowing this administration and those in the future to pause student loan repayments in the face of future national emergencies.1
- The Department of Education has announced a 12 month “on ramp” repayment program that will stretch from October 1, 2023 to September 30, 2024. During this period, loan late payments and loan delinquencies won’t be reported to credit agencies and will have no impact on credit scores.2
- Many are still hoping for some type of forgiveness. President Biden stated his administration will be pushing for student loan forgiveness again using a different legal authority—the Higher Education Act of 1956. This is likely to take some time and the outcome is uncertain.1
- The Biden administration announced a potential overhaul to income-driven repayment plans for borrowers aiming to significantly decrease monthly payments. These updates—called Saving on A Valuable Education (SAVE)—while still not finalized, are meant to take full effect by July 2024. Under this new plan, certain borrowers may be eligible for a $0 monthly student loan payment, but even those who are ineligible for such savings should still expect to potentially save $1,000 a year compared to the current REPAYE plan.3
- House Republicans passed a resolution to require borrowers to retroactively repay several months of student loan payments waived by Biden’s extension. The White House has vowed to veto this bill if passed by the Senate.4
Take smart steps now to prepare for repayment
Review your current federal student loan debt. Many student loan services ended their relationship with the government, resulting in around 16 million borrowers’ loans moving to another servicer. If you know your servicer, double check that they have your correct contact information on file, so you’ll be notified of your upcoming due date(s). If you are uncertain of your servicer, you can find this information by visiting studentaid.gov.*
Understand your student loan payments. Your payment amount may have changed if you paid balances down during the pause. Your student loan servicer should be able to give you an idea of what your monthly student loan payments will be when they resume. You could also visit studentaid.gov* to run simulations and explore different repayment types, such as income driven plans. Work with a financial advisor to compare various repayment plans and their impact on your monthly cash flow.
Explore refinancing with a private student loan vendor. Refinancing your loans with a private lender may result in a lower interest rate, which may translate to a lower monthly loan payment. Borrowers working in the public sector or taking advantage of federal debt relief programs, such as income-driven repayment plans, loan forgiveness, or public service loan forgiveness (PSLF) may not want to refinance, as these programs are not available for private loans. Understand that protections like forbearance, deferment, etc., that discharge in the event of death/permanent disability, may not have analogous provisions if you refinance with a private institution.
Connect with your financial advisor. Your advisor can help you review where you are now and how student loan repayment could impact your financial plan.
Based on “What you need to know about student loan forgiveness and repayment” by “Goldman Sachs Ayco Personal Financial Management”, (August 17, 2023).
* Any reference to an Internet site sponsored and maintained by third parties (the “Site”) is provided solely as a convenience to you, and does not constitute an endorsement, authorization, sponsorship, or affiliation by The Ayco Company, L.P. d/b/a Goldman Sachs Ayco Personal Financial Management (“Ayco Personal Financial Management” or “Ayco”) or its affiliates. Ayco has not reviewed or tested any information, software, or products found on the Site, and therefore makes no representations regarding the content or sponsors of the Site or the suitability or appropriateness of the products or transactions described therein.
1 Carpenter, J. 2023. What the Supreme Court’s rejection of student-loan forgiveness means for you. The Wall Street Journal.
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United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.
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