The student loan repayment pause has been in effect since March 2020, but it's finally set to come to an end in just a few weeks. But when do you actually have to make a payment on your loans? When does the Department of Education start charging interest again? Here's a rundown of the important dates all federal student loan borrowers need to know.
When does the repayment pause officially end?
In May, the Biden administration and Congress reached an agreement to raise the federal debt ceiling. As part of the agreement, both sides agreed that the student loan repayment and interest pause will end after Aug. 30.
While the pause was set to end this fall anyway, it's fair to say that many borrowers weren't exactly convinced it was going to happen until the debt ceiling deal passed. After all, since the pause was implemented in March 2020, it has been extended eight times. But the debt ceiling deal legally prohibits the Department of Education from using its authority to extend the repayment pause.
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When do you have to start paying student loans again?
The short answer is that your first student loan payments will be due in October. The student loan repayment pause ends after Aug. 30, so October deadlines will give all borrowers at least a month between the official end of the repayment pause and when their first payment is due.
The exact date that your student loan payment will be due depends on your situation. Plus, federal student loan servicers will allow you to change your payment due date within a month in order to make it convenient to your pay schedule. As an example, if you get a paycheck on the 15th of each month, you may want to schedule your payment due date for the 16th or 17th, just to make sure there's money in your checking account. Different servicers may have different rules.
For example, Mohela doesn't allow borrowers to set due dates on the 29th through the 31st of the month and says that it can take up to two billing cycles to make the change. But the point is that borrowers don't all have the same payment due date -- although everyone will have a payment due at some point in October.
When does interest start accumulating?
Here's an important date to know. Although your first federal student loan payments after the expiration of the pause won't be due until October, it's important to realize that interest starts accumulating right after the pause expires. Since the debt ceiling deal mandated that the payment and interest pause will end "after Aug, 30," that means interest will begin accumulating on student loans on Sept. 1.
Here's why this is important to know. Let's say you owe $30,000 in student loan debt at an average interest rate of 6%. That means interest accumulates at the rate of roughly $5 per day on your account. That's about $1,800 per year. So even though your first student loan payment isn't due until October, you can expect that a significant amount of interest will have accumulated on your student loans before the due date arrives.
When do you really have to start paying your student loans again?
Sept. 30, 2024. That is perhaps the most important date we'll discuss here.
As part of the payment restart, the Biden administration has created a 12-month "on-ramp" to repayment that begins in October. While payments will officially be due and interest will be charged, any missed payments won't be reported to credit bureaus or have any negative consequences. Plus, any interest accumulated during this period will not be capitalized (that is, added to your loans) at the end of the period.
To be clear, the White House advises that borrowers who can afford to pay right away after the pause expires should do so. This on-ramp is effectively a grace period that is intended to help borrowers who might have trouble making their payments after more than three years of not having to worry about them. But Sept. 30, 2024, is the date after which not paying your student loans can have undesirable consequences.
