The student loan pause will end on October 1. As repayments resume, expert Tara Siegel Bernard addresses common inquiries regarding student loans.

After more than three years of the student loan pause during COVID-19, it's time for payments to restart this fall. Approximately 44 million borrowers owe over $1.7 trillion in federal student loans starting October 1.

Although the Biden administration failed to achieve student loan forgiveness this year, a new repayment plan promises some relief. Tara Siegel Bernard provides insights on cancellation, forgiveness, and repayment options.

LISTEN: Tara joins a podcast to discuss everything about student loans.

1. Is The Student Loan Payment Pause Coming to an End?

The pause on student loan payments is concluding, with payments set to begin again on October 1.

“Interest has been paused since March 2020,” explains Bernard. “It’s as if the government pressed the pause button on your loans, and now they’re starting up again.”

Most borrowers will see interest accrue again starting September 1, before payments are due. Fortunately, the government won’t backdate interest, so you won’t face significant interest increases when payments resume.

2. Is Another Student Loan Pause Likely?

Unfortunately, another pause on student loans isn't anticipated unless a significant crisis occurs, like the pandemic. However, the current administration is striving to simplify repayment, and some loans may still qualify for forgiveness.

Some individuals have taken advantage of the pause to save funds, which may prove beneficial.

“Many have been stashing cash in interest-bearing accounts while waiting to see what happens,” Bernard says. “If you’ve built an emergency fund, making a lump-sum payment could be a wise move.”

While paying off debt, including student loans, is generally beneficial, consider your overall income and spending. For borrowers with low interest rates, maintaining minimum payments while investing excess cash into higher-yield options might be more advantageous.

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3. What Is The SAVE Plan?

Following the Supreme Court's decision against the Biden administration’s forgiveness plan in June, a new strategy was developed for borrowers.

The Saving on a Valuable Education (SAVE) Plan will replace the REPAYE Plan. This new approach determines payments based on income and household size.

“SAVE improves on previous programs by halving payments for many borrowers,” Bernard states. “It bases payments on a smaller portion of your income, making them more manageable.”

Highlights of the SAVE Plan include:

  • Raising the income exemption from 150% to 225%. This means single borrowers earning $32,800 or less annually won't have to make payments.
  • Eliminating remaining interest. Currently, if payments don’t cover both principal and interest, the unpaid interest is added to the balance. “Many borrowers feel frustrated watching their balances grow despite making payments. This new plan addresses that issue,” Bernard explains.
  • Removing spousal income requirements. Unlike other income-driven repayment plans, the SAVE Plan does not factor in a spouse's income.
  • Faster forgiveness. If you started with a principal balance of $12,000 or less, your balance will be forgiven after 10 years of payments, compared to 20 or 25 years in most other plans.

4. How Can I Join The SAVE Plan?

Those enrolled in the REPAYE Plan will automatically transition to the SAVE Plan. If you are on an income-driven repayment plan, you can switch to REPAYE now or to SAVE once it is available.

“You’ll qualify for the program as long as you have a direct loan,” Bernard notes. “Federal loans come with various protections, including income-driven repayment options and public service loan forgiveness.”

Note that Parent PLUS loans do not qualify for the SAVE Plan, but they may become eligible for an income-contingent repayment plan if consolidated.

5. Is Student Loan Forgiveness Possible?

“The Biden administration hasn't entirely abandoned the idea of cancellation,” Bernard states. “They’re exploring other options, but it’s unlikely to happen soon.”

While achieving cancellation is challenging, you might still qualify for forgiveness through:

  • Payments on an IDR plan. Depending on your repayment plan, you might qualify for forgiveness after 10, 20, or 25 years.
  • Public Service Loan Forgiveness (PSLF). To qualify, you need to have a qualifying job while making payments, complete 120 qualifying payments, and be on a qualifying repayment program like SAVE.