Federal student loan repayments are set to resume next month. For the first time in three and a half years, borrowers will have to make payments on their outstanding student loans, with recent graduates just starting to make payments.
Student loan repayments were halted and interest rates were set to zero percent at the beginning of the COVID-19 pandemic by the Federal Student Aid office through the U.S. Department of Education, according to their website.
This move was made to support Americans through the pandemic, and the payment pause was extended multiple times over the Trump and Biden administrations, until debt ceiling negotiations earlier this year prevented Biden from extending the pause any further.
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Accruing interest at the fixed interest rate set when the loan was disbursed started again Sept. 1. Currently, the fixed interest rate for any new undergraduate federal loan is 5.5% through July 2024, according to the Federal Student Aid office.
Over 727,000 Wisconsinites have student loan debt, according to WordsRated, a data and analytic group. This debt totals $23.2 billion.
The Federal Student Aid office has laid out steps to remind borrowers and teach first time student loan payers about the process of repayment, emphasizing some existing learning curves after repayments resume.
If borrowers were enrolled in an automatic loan repayment plan before the pause occurred, they will have to re-enroll through their borrowing institution. The individual lenders should reach out to alert borrowers to this. If borrowers don’t re-enroll in automatic payments, their payments will not restart, according to the Federal Student Aid office.
If a borrower misses a payment and is eligible for the original payment pause, the Federal Student Aid office has created a temporary on-ramp period through Sept. 30, 2024. This on-ramp period protects borrowers from having a delinquency reported to credit reporting agencies. But, payments are still due, and interest will continue to add up.
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Communications Manager for the University of Wisconsin Office of Student Financial Aid Karla Weber Wandel encourages all students to submit the FAFSA when it becomes available in December.
“Always submit the Free Application for Federal Student Aid each year you’re a student,” Wandel said. “That application considers you for most of the sources of financial aid (grants, some scholarships, work-study, and loans) that UW has to offer, and you never know what you’re eligible for until you apply.”
Wandel encourages students to check the Wisconsin Scholarship Hub continuously throughout the year and refer to the scholarship timeline to help discover scholarships and learn about the scholarship process.
Professor in the UW School of Education Nicholas Hillman’s research looks at how finance, policy and geography shape educational opportunities in the U.S.
“Borrowers should minimally make sure their contact and bank information is up to date with their loan servicer, or that they have a way of ensuring their first payments will be on time,” Hillman said in an email statement to The Badger Herald. “If they can’t make this first payment, they can contact their servicer to decide what options are best for them.”
If students are struggling to repay their loans or want to better understand their repayment plan or options, they can contact their servicer, Hillman said.
