What student loan borrowers should know about the 12-month start-up period
A woman plans a budget.
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Do I need to do anything to apply for relief?
According to the U.S. Department of Education, borrowers are not required to enroll in the intake phase.
If your loans were eligible for the payment holiday during the pandemic, which primarily includes those in the Direct program, then you are also eligible for this type of payment holiday.
Nonqualified loans include private student loans and commercially held federal family education loans.
Will my debts continue to accrue interest?
Yes. Federal student loan interest began accruing September 1.
Unlike during the pandemic-related pause on federal student loans, when interest rates were set to zero, your debt will continue to grow at pre-COVID rates next year. If you forego payments or only make partial payments during the training period, this means you will likely have a larger bill in a year.
For this reason, Scott BuchananExecutive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, said he hopes borrowers don’t think this is just another payment pause.
“There is a fundamental difference here, which is that interest now accrues,” Buchanan said.
Are there any consequences for non-payment?
Experts assume that there will be hardly any consequences other than interest accrual if no payments are made during the switch-on phase. However, as with all student loans, caution is advised. One borrower previously told CNBC that her account was placed on delinquent status because she didn’t make her October payment.
Still, the Department of Education says it will not report your missed payments during this period to the credit bureaus.
Borrowers should also be protected from debt collection activities, including garnishment of their wages or pension benefits, said higher education expert Mark Kantrowitz.
Should I make payments or not?
If you can afford to make your student loan payments, most experts recommend doing so to avoid incurring a larger bill at the end of your study term.
Still, experts say some borrowers with low debt levels believe they qualify President Joe Biden’s Plan B for student loan forgiveness takes their chances and holds off on making their payments.
“They’re trying to buy themselves time,” said Braxton Brewington, spokesman for the Debt Collective.
Biden’s plan is currently going through the regulatory process. It is unclear whether the government’s second attempt to provide relief to the people will end differently than the first, with failure in the Supreme Court.
What happens if my service technician makes a mistake?
Resuming student loan payments is proves to be difficult for many. Borrowers report incredibly long wait times to contact their service providers and receive incorrect invoices.
A customer service representative at a servicing company told a borrower he hadn’t even heard of the on-ramp phase, Brewington said.
If you feel like you’re facing consequences you shouldn’t expect because of a missed payment, Kantrowitz recommends contacting Federal Commissioner for Student Aid.
Borrowers can also see if they are eligible for existing forbearance options.
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