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Updated September 1, 2023
Federal Student Loans: Return to Repayment
In response to the COVID-19 pandemic, since March 2020,
the accrual of interest, monthly payments, and involuntary
collections have been paused on most federal student loans.
The Fiscal Responsibility Act of 2023 (FRA; P.L. 118-5)
specifies that the interest accrual and monthly payment
pauses shall cease to be effective 60 days after June 30,
2023 (i.e., August 29, 2023). Thus, after over three years of
no interest accrual and no required monthly payments on
most federal student loans, the Department of Education
(ED), contracted student loan servicers, and millions of
federal student loan borrowers are preparing for or are in
the midst of the end of those flexibilities.
This In Focus provides an overview of ED's plans for
transitioning federal student loan borrowers into repayment
on their federal student loans and discusses selected policy
issues. Detailed information about the federal student loan
interest accrual and monthly payment pauses can be found
in 46314
Interest Accrual
From March 2020 through August 31, 2023, interest accrual
on ED-held loans was suspended. As of June 30, 2023, at
least 38 million student loan recipients with balances
totaling about $1.4 trillion had interest accrual paused on
their loans. (CRS analysis, ED, Federal Student Loan
Portfolio Summary)
For most borrowers, the interest rate charged on their loans
is to be the same as it was before the interest accrual pause
began. Borrowers who consolidated their loans into a Direct
Consolidation Loan during the interest accrual pause would
have interest rates on their new Consolidation Loans equal
to the weighted average of the interest rates on the loans
they consolidated, with the result rounded up to the next
higher one-eighth of a percentage point.
Monthly Payments
During the payment pause, borrowers were not required to
make monthly payments on their ED-held federal student
loans. (In practice, ED placed all such loans in
administrative forbearance.) Borrowers could opt out of the
payment pause. While periods of forbearance do not
typically count toward required payment periods under
various loan forgiveness programs (e.g., Public Service
Loan Forgiveness [PSLF]), payments that would have been
made during the payment pause count toward meeting such
loan forgiveness requirements.
ED's contracted loan servicers began sending monthly
billing statements to borrowers in August 2023, and
monthly payments are due beginning October 2023.
As of May 30, 2023, about 29 million student loan
borrowers with more than $1.1 trillion in ED-held loans had
their monthly payments paused. (Borrowers affected by the
interest accrual pause may not necessarily have participated
in the payment pause, such as individuals whose loans were
in in-school status.) Of these borrowers, 6.3 million with
student loans totaling $264 billion only have loans that have
not yet been placed into a repayment plan (email from ED,
Office of Legislation and Congressional Affairs to CRS,
July 10, 2023.) This may be an indication of borrowers who
have never previously been in repayment status on their
current outstanding loans and, thus, may not have any
previous experience making payments on their student
loans.
O-Ramp to Repayment
To facilitate transition into repayment status for borrowers,
ED announced a 12-month on-ramp to repayment, which
is a set of flexibilities to protect the most vulnerable
borrowers from the worst consequences of missed
payments following the payment restart. For October 1,
2023, to September 30, 2024, borrowers who miss monthly
payments due on their loans are not to be considered by ED
to be delinquent on those loans, nor are such borrowers to
be reported to consumer reporting agencies as delinquent,
placed in default status, or referred to private collection
agencies. Unlike the payment pause, periods of missed
payments are not to count toward meeting loan forgiveness
requirements, such as under PSLF.
Saving on Valuable Education (SAVE) Plan
On July 10, 2023, ED published a Final Rule to revise the
current Revised Pay As You Earn (REPAYE) repayment
plan (a type of income-driven repayment [IDR] plan). In
doing so, ED renamed the plan the SAVE plan. In general,
the SAVE plan will result in lower monthly payments for
all qualifying borrowers as compared to current REPAYE
plan rules. Also, after applying a borrower's monthly
payment to their loan, any unpaid accrued interest is not to
be charged. Provisions of the plan are to be implemented on
a tiered schedule, with some provisions effective July 30,
2023, and others effective July 1, 2024. Provisions
implemented in both tiers would generally lower borrower
monthly payments. ED intends to automatically place all
borrowers currently enrolled in the REPAYE repayment
plan into the SAVE plan later this summer. Borrowers
not already enrolled in the REPAYE repayment plan may
apply for the plan as of July 30, 2023.
Selected Issues
This section highlights selected policy issues regarding
federal student loan borrowers' return to repayment.](ViewImageLocal?handle=hein.crs/govemsg0001&div=1&collection=&method=preview&ext=.png&size=3)