With the student loan repayment pause officially coming to an end next week, Americans will have to begin paying back their loans for the first time in more than 18 months. But what will happen if you miss your payment?
The Biden administration is providing Americans a chance to get their feet under them for the next 12 months through its “on-ramp period.”
The “on-ramp” program will run through Sept. 30, 2024, allowing borrowers to miss their monthly payments without being reported as being in default to the national credit rating agencies, which could affect a person’s credit score.
Borrowers who qualified for the pandemic-related payment pause will be eligible for the “on-ramp” period. However, the Department of Education does specify that interest on loans will still accrue.
To be under the “on-ramp” program, borrowers will not need to apply, as they are automatically under the program.
While typically, borrowers who miss a payment would see their loan considered delinquent the first day after payment is missed, reported to credit agencies as delinquent after 90 days past due, and sent into default after 270 days, the program will stop reporting missed payments.
The program is expected to give some relief to borrowers who are still not ready to make payments amidst current economic struggles.
Still, borrowers should remember that missing a payment with interest rates returning could result in them owing more overall.
The Biden administration has offered another method for borrowers to cut costs on their loan repayments. The president’s SAVE plan, a new income-driven repayment plan, has cut monthly payments for lower-income borrowers.
For example, under the plan, a single borrower earning $32,800 or less would only have to pay $0 monthly.
For more information on income-driven repayment plans and other loan forgiveness offerings, visit StudentAid.gov.