By: U.S. Undersecretary of Education James Kvaal
After more than three years, in June 2023, Congress ended the student loan payment pause, which suspended payments and interest for the duration of the pandemic. This fall, more than 28 million borrowers are returning to repayment, an unprecedented challenge for both borrowers and the Department of Education.
Today, the U.S. Department of Education (Department) is releasing data showing that 60 percent of the 22 million borrowers with payments due in October made those payments by mid-November. More than 4 million of these borrowers owe payments for the first time. Millions more were not making payments prior to the payment pause because they were delinquent or obtained a deferment or forbearance. (These figures exclude borrowers who are returning to repayment this fall but did not have a payment due in October, such as those who returned to school, recently left school and do not yet owe payments, or who are covered by the Department’s recent actions to address servicing errors.)
While most borrowers have already made their first payment, others will need more time. Some are confused or overwhelmed about their options. We want to make sure borrowers know that our top priority is to support student loan borrowers as they return to repayment.
To give borrowers breathing room while they work student loan payments back into their monthly budgets, we created the 12-month on-ramp period. Until next September, borrowers will be protected from the harshest consequences of missed payments, such as delinquency, default, and mandatory collections.
In addition, this year, President Biden created the SAVE Plan, the most affordable loan plan ever, especially for borrowers with high debts and low incomes. The SAVE Plan is an income-driven plan, which means payments are set on a slide scale based on how much borrowers earn. Already, more than 5.5 million borrowers are enrolled in the SAVE Plan, including 2.9 million who are protected from making any payments at all.
Because student loans should not come before the necessities, borrowers earning less than about $15 an hour, or more if they have families to support, will have $0 payments on their debt. Borrowers who still owe a payment are saving roughly $102 per month, or $1,244 per year. The SAVE Plan also eliminates runaway interest that can cause balances to grow even for borrowers paying what they owe.
The Department has also worked tirelessly to fix broken loan forgiveness programs so that borrowers get the help they have earned. We have already approved nearly $132 billion in debt cancellation for more than 3.6 million borrowers through Public Service Loan Forgiveness and other reformed programs. For example, before the Biden-Harris Administration, only 7,000 borrowers in total received forgiveness through Public Service Loan Forgiveness. We reformed the program – and since President Biden took office, over 750,000 borrowers have received Public Service Loan Forgiveness. These are teachers, firefighters, nurses, and other public service workers who earned relief – and we are committed to delivering it to them.
We are not going to stop our efforts to fix the broken student loan system. Next summer, through the SAVE Plan, we will cut payments on undergraduate loans in half. We are creating new loan forgiveness programs through our regulatory process. We are helping borrowers with defaulted loans access these affordable plans through the Fresh Start program. And we will modernize the student loan servicing system next year, with stronger accountability for getting borrowers the help they need.
In the meantime, we will continue to give borrowers the information and support they need to take advantage of all of the benefits of federal student loans. We have given clear guidance to our student loan servicers that they will be held accountable if they don’t meet their basic contractual obligations to borrowers and the Department. We have created new capacity for the Department itself to communicate directly with borrowers and launched data-driven campaigns for struggling borrowers. We are working with outside groups like Civic Nation and the NAACP through the SAVE on Student Debt Campaign. And we are seeking funding from Congress to allow us to fully fund our borrower communication plans. More information is available on www.studentaid.gov.
Today’s data show that most borrowers are already making payments, while millions are benefiting from expanded student loan benefits and forgiveness. Borrowers who are still confronting the challenge of making room for student loans into their monthly budgets are protected from the worst consequences of missed payments through the on-ramp. We will not rest until the Biden Administration has fixed a broken student loan system.
FAQs
Many borrowers also took on other debt during the payment freeze, studies show. Economists at the University of Chicago, for example, found that people who benefited from the moratorium increased their leverage by $1,200 on average.
Why is MOHELA putting me on administrative forbearance? ›
MOHELA administrative forbearance
Others received bills with incorrect payment amounts. As a result, the Education Department instructed MOHELA to put affected borrowers into an administrative forbearance until the issue was resolved.
Should I pay off my student loans or wait for forgiveness? ›
No opportunities for student loan forgiveness: If you're eligible to have your student loans forgiven after a certain amount of time based on your career, it doesn't make sense to repay your loans early. You're better off making your required payments until the debt is forgiven.
Is the student loan offset suspended in 2024? ›
Student loan tax garnishment is when the government takes a portion (or all) of your tax refund to pay off your defaulted federal loans. Tax garnishment is temporarily suspended through September 2024 thanks to the Fresh Start program. Private lenders are generally not able to garnish your tax refund.
Is student loan forgiveness bad for the economy? ›
While there are few direct estimates of the effect of debt cancelation in the literature, estimates based on the relationship between wealth and consumption suggest that this forgiveness could increase consumption by several billions of dollars each year in the next five to ten years.
Will student loans restarting cause a recession? ›
As Bloomberg reports (paywall), "As monthly debt payments resume, gross domestic product growth could drop by an estimated 0.1% in 2023 and 0.3% in 2024." That could increase the likelihood of a recession and stall the economic recovery in key industries still recovering from the pandemic's impact, like retail and ...
What is going on with MOHELA student loans? ›
In the coming months, MOHELA will be reaching out to their borrowers to let them know that their accounts with MOHELA will be transitioning to a new servicing platform. Borrower accounts will continue to be transferred throughout the winter and spring, at which point the new loan servicing platform will go live.
How do I know if my MOHELA loan will be forgiven? ›
If you work in certain public service jobs and make 120 payments on your Direct Loan(s), you may be eligible to have your loans forgiven. If you are a teacher in a low-income school or educational service agency, you may be eligible for Teacher Loan Forgiveness.
Is administrative forbearance good or bad? ›
With forbearance, borrowers can temporarily stop making payments or make smaller payments. However, it's important to note that forbearance does not lead to loan forgiveness or progress towards paying back the loan. As an alternative, borrowers should consider income-driven repayment plans.
Will my credit go up after student loan forgiveness? ›
The impact of student loan forgiveness depends greatly on a borrower's unique credit profile. For some, they may see a slight dip, but for most, forgiveness will have a net positive effect.
IDR Plans That Had Annual Recertification in March 2024
If you did not recertify by your original deadline, your monthly payment might have increased. We are working to revert your monthly payment to its previous monthly amount until your new recertification deadline.
What is the average student loan debt? ›
Average student loan debt in America
51% of 2021-22 bachelor's degree recipients graduated with an average of $29,400 in student loan debt. Among all borrowers, the average student loan debt in 2023 was $38,787. 53% of federal student loan borrowers owe $20,000 or less.
Is the IRS holding refunds for student loans in 2024? ›
Important note: As part of the Fresh Start Program, borrowers with eligible defaulted loans are receiving certain relief measures, including tax refunds (and child tax credits) not being withheld. This relief will continue through at least September 2024.
Will the IRS take your taxes if you owe student loans? ›
The IRS will only take your refund if you're delinquent with your student loans to offset debt. Your student loan interest deduction might be lower than prior years if you paid less interest in the current tax year. This can affect how much refund money you receive.
Is the student loan forgiveness going to be approved? ›
Today's announcement brings the total loan forgiveness approved by the Biden-Harris Administration to $167 billion for 4.75 million Americans.
What does the student loan pause mean for me? ›
Now that the payment pause has ended, you are responsible for repaying both your loan principal and any unpaid interest. In some circ*mstances (such as at the end of a deferment period for PLUS and Unsubsidized Direct Loans), unpaid interest is capitalized (added to your loan principal balance).
How does student debt affect people? ›
Key Takeaways. Carrying student debt can affect your ability to buy a home if your debt-to-income ratio is too high. If you have too much student loan debt, you won't be able to save as much for retirement. Student loan debt can lower your credit score, especially if you fail to make on-time payments.
How would student loan forgiveness affect the housing market? ›
The report also suggests that while the student debt relief might help individuals save up for larger down payments, the overall impact could instead make homeownership less accessible for many.
How do student loan payments affect the economy? ›
Student loan balances can have a significant impact on the economy because they prevent borrowers from moving forward with other financial plans such as buying a home or a car. Student loan debt hinders spending by limiting the amount of free cash in consumers' pockets.
