Student Loan Repayments Restart Soon: What You Need to Know

After an unprecedented pause that started in March 2020, student loan repayments will finally resume in October 2023. For borrowers, the pause offered a temporary respite during a tumultuous period. Unemployment surged to 14.7% in April 2020, the highest since the Great Depression, as the pandemic put millions of Americans out of work.

After the unemployment situation abated, a period of high inflation followed, the highest since the early 1980s. The cost of everything from rent to appliances to the most basic necessities has increased rapidly from 2021 through today. The rate has come down from its 9.1% peak last year. However, it remains well above the Federal Reserve’s 2% inflation target.

Inflation over the past 10 years

Source: U.S. Bureau of Labor Statistics, as of June 2023

The government extended student loan forbearance nine times since the pause first began. However, the debt ceiling deal passed by Congress in early June finally put an end to these extensions. Interest will now start to accrue again for student loans starting in September. The first payment is due in October, over three and a half years after the initial postponement.

Making things even more challenging, new grads were looking forward to some sort of loan forgiveness, something the current administration pledged in August 2022. President Biden’s student loan forgiveness proposal intended to forgive federal student debt of $20,000 per individual for those who received Pell Grants, and up to $10,000 for borrowers below a certain income threshold – $125,000 for single borrowers and $250,000 for married couples.