U.S. student loan borrowers are taking their time to resume making payments after the last pandemic-related pause on payments expired late last year.
Repayments for federal student loan borrowers were suspended from mid-March 2020, when the COVID pandemic began, and remain in effect until September 1, 2023, three and a half years after the payment suspension began.
According to data from the Department of Education, as of the end of March, about 20 million borrowers had resumed paying their student loans, but about 19 million had not resumed paying and their accounts remained delinquent, in default, or on hold due to payment deferrals or forbearance, The New York Times reported.
Borrowers have until September to take advantage of so-called on-ramps that allow them to postpone payments without reporting a default to credit bureaus.
However, additional interest will continue to accrue to your account while the on-ramp is active.
As of the end of March, 42.8 million federal student loan recipients owed a total of $1.62 trillion, according to the data.
The number of recipients fell to the lowest level since the third quarter of 2022 as President Biden moves forward with a student loan grant plan aimed at canceling or reducing borrowers’ outstanding balances.
Biden’s student loan debt forgiveness plan has been repeatedly rejected or put on hold by federal courts, and the administration is exploring ways to address the issue that could be legally accepted.
The Biden administration’s new Income-Contributed Repayment (IDR) program, known as the Savings for a Valuable Education (SAVE) Plan, is the latest program to encounter legal headwinds.
Last week, a federal court in Missouri blocked the Biden administration from granting additional debt forgiveness to borrowers under the SAVE Plan.
A federal judge in Kansas also ruled last week that the SAVE Plan was illegal, but that ruling was put on hold by a federal appeals court on Tuesday, allowing the Department of Education to continue cutting payments under the plan.
The SAVE Plan, announced in 2023, amended and replaced a previous IDR plan called the REPAYE Plan.
Under the SAVE plan, a borrower’s monthly payment is calculated based on their income and the number of people in their family.
The program would reduce payments for nearly all borrowers and allow forgiveness after 10 years for those who took out loans of less than $12,000 initially.
It also includes interest benefits for borrowers who are paying off their loans in full each month, but whose payments are not enough to cover the monthly interest.
The federal government will pay the remainder of the interest accrued under the plan for that month.
So, in effect, this provision prevents the balance from increasing due to unpaid interest.
