August 31, 2023
If you have a federal student loan things are going to start changing tomorrow.
After more than three years – starting September 1st — interest will start accruing again on your federal student loan.
So here’s what you need to know about tomorrow.
Back in March of 2020 – because of the pandemic the federal government not only paused monthly payments but also set federal student loan interest rates at zero percent. But starting September 1st — interest will once again start accruing the way it used to on your loan.
So what does your interest rate look like?
Well, it depends on two things – the type of federal loan you have and the first disbursement date of the loan. The dispersant date is the date your school paid out your direct loan by applying the loan funds to your school account or paying you directly, or both.
And those rates vary widely from as little as 2.75% all the way up to 8.5%. Most borrowers’ interest rates will be the same as before the 0% interest began. But some borrowers will find their interest rate has changed because — for example, you consolidated your loans during the payment pause.
What should you do now?
First – brace yourselves. You will get your first monthly bill for your federal student loan in a few weeks – if you haven’t gotten it already — and your first payment is going to be due in early October.
If you haven’t done it already, you need to updated your contact information on studentaid.gov and you should also update that information on your loan servicer’s website. It’s possible – your servicer may have changed over the last few years so to find out who your servicer is now – log in to your student aid account.
Then you should look into your repayment options. There are new income driven repayment programs available including the save program which I have been talking about a lot lately. If you were on an IDR plan in the past and want to continue in that program you need to recertify your income. Sooner is better than later but you have up to six months to recertify.
The department of education says it’s not mandatory but you can also sign up for autopay and if you do, you’ll save a quarter percent on your interest rate.
Now if you just can’t swing these payments in October, the president created what’s called the “on-ramp” program. Of course payments will still be due and interest will still accrue but the on-ramp program will not report you as delinquent to the credit agencies if you are late with a payment, miss a payment or send in a partial payment. That will last through September 30 of next year.
You can also apply for forbearance or deferment again. But that of course has its own pros and cons.
Understanding interest rates for your loans here.
Check out interest rates from 2010-2023 here.
How to prepare yourself to restart your payments here.
