Are You Ready for the End of the Student Loan Federal Interest Holiday?

Everyone loves a holiday, and the best holiday is one that saves you money! The federal student loan interest and payment pause began on March 20, 2020, when the federal government suspended loan payments, stopped collecting on defaulted loans, and dropped the interest rate to zero on US Department of Education-owned federal student loans. The temporary relief became law on March 27, 2020 and was scheduled to expire that year on September 20, 2020.

As the pandemic continued, the expiration deadline for student loan relief was extended several times in 2020 and 2021 and will expire in Fall 2023, with student loan interest resuming September 1, 2023, and monthly payments starting to be due again in October.

The payment pause brought some much-needed relief to those holding federal student loan debt, but some borrowers might be wondering how they can prepare for the day when it ends.

What should I do if I hold federal student loan debt?

Here are some steps you can take before the federal student loan pause ends:

1. Prepare your savings. Take time to prepare to resume making your loan payments. It was probably easy to get used to having that extra money each month – are you ready to start making payments again? Ideally, you’ve already started saving for that eventuality. If not, think about setting aside some money to help ease the transition back into your normal payment schedule. Check your federal loan balance(s) to determine how much you owe and what your payments will be once the holiday is over. If your income or expenses have changed due to the pandemic, factor that into your monthly budget.
2. Update your contact information on StudentAid.gov and on your servicer’s website. Make sure your address, phone number, and email are up-to-date.
3. Check if you qualify for student loan forgiveness. Depending on your income and employment, you may qualify for Income-driven Repayment (IDR) and/or Public Service Loan Forgiveness (PSLF). These repayment programs adjust your monthly payment amount based on your income and family size. For your payment amount to be adjusted before your first bill, apply for an IDR plan as soon as possible. Schedule a free 30-minute consultation with one of student loan specialists to learn how to qualify.
4. Enroll (or reenroll) in AutoPay on your servicer’s website, which will ensure your payment is automatically processed every month so you don’t miss a payment. AutoPay is optional, but if you choose autopay, you could save 0.25% on your interest rat
5. Check the current interest rates and compare them to what you’re paying now. If the interest rates currently being offered are attractive, you may re-strategize your current repayment plan and consider refinancing one, some, or all of your loans. The chief advantage of refinancing is that you could potentially save money by locking in a lower interest rate now. The difference of even 0.5% or 1.0% could translate into thousands of dollars of savings over the life of your loan. Other advantages of refinancing include: a single monthly payment on one consolidated loan, paying off your loans faster if you adjust your loan to a shorter term, being able to work with a lender of your choice, and taking advantage of unique perks from private lenders like Laurel Road. With the Laurel Road Linked Checking account, an FDIC-insured¹online checking account, you may get an additional rate discount during refinancing when you open a checking account and set up qualifying monthly direct deposits. This account also has no minimum balance to open and $0 monthly maintenance fees. Remember that many lenders will let you check your rate without affecting your credit score,² so it may be worth checking your refinancing rate now to compare your options. The chief disadvantage of refinancing is that you’d lose access to government programs and benefits, such as IDR and PSLF. For more information on federal student loan repayments, visit studentaid.gov/. If you are considering refinancing your student loans now, you can read more here.

What should you do next?

In addition to following the five steps above, you can use our resources to learn more and help prepare your budget for the end of the federal student loan payment and interest pause:

• Guide to Federal Student Loan Repayment
• Guide to Student Loan Repayment
• How to Apply for Student Loan Forgiveness
• PSLF Explained
• 4 Reasons to Refinance Student Loans

All holidays eventually come to an end, and this one will too, so be prepared!