All you need to know about the return of federal student loan payments

Tens of millions of Americans are gearing up to make student loan payments in the coming weeks for the first time in years as a pandemic-era reprieve finally comes to an end.

Payments have already begun pouring into the Education Department as some borrowers begin to repay. But the major test for the federal student loan system — and the Biden administration — lies ahead when official due dates arrive in October.

Individual borrowers face a series of decisions about how to repay: whether they should enroll in the Biden administration’s income-driven repayment program or avail themselves of a new, temporary forbearance option that postpones payments but drives up interest costs.

At the same time, a prolonged government shutdown could complicate the Education Department’s ability to manage the student loan program just as payments are resuming. And millions of Americans are still waiting to see how Biden’s do-over on mass student debt cancellation shakes out.

Here’s our quick guide to some of the moving pieces:

When will student loan debt payments resume?

After more than three years of a pandemic pause, tens of millions of Americans will be required to make a payment on their federal student loans at some point in October — but there will be fewer repercussions than usual if they don’t.

The exact date depends on when during the month a borrower’s individual due date falls. But interest accrual on the loans — which had been kept at 0 percent since March 2020 — began on Sept. 1.

The Biden administration has initiated a safety net program for borrowers who have trouble paying. The Education Department won’t report borrowers who fail to make their monthly payments as delinquent to credit bureaus. But interest will continue accruing on their loans during that forbearance period. The department says that flexibility will extend until October 2024.

What happens with student loan bills if the federal government shuts down?

Federal student loan borrowers will still owe payments — and they’ll continue to be charged interest — even if the federal government shuts down. Even if the government isn’t fully funded, borrowers’ payment obligations remain the same. That’s been the case during previous shutdowns.

But the amount or quality of customer service that borrowers receive from the government could be in jeopardy during a government shutdown.

The Education Department relies on Congress to appropriate money each year to pay loan servicing companies — such as Nelnet, MOHELA and Aidvantage — to manage borrowers’ payments.

Some of that funding is spread across multiple years, giving the agency some leeway to continue normal loan servicing operations for some amount of time. Whether borrowers experience any disruptions would likely depend on the length of the shutdown.

But it’s worth noting that the Education Department has less runway now than it did during previous shutdowns. The department is already dealing with a tight budget on loan servicing that earlier this year forced it to curtail call center hours and allow for higher hold times.

The Biden administration is promoting an optional income-driven repayment program called SAVE. How can people qualify?

The SAVE Plan, which allows most borrowers to have lower monthly payments and caps the interest they have to pay in some cases, rolled out earlier this summer.

Any borrower with a direct federal student loan — except parent borrowers or those who are in default on their debt — qualify for the program. Borrowers can sign up directly at StudentAid.gov or with their loan servicer.

The Education Department says that more than four million borrowers are already enrolled in the program. That consists mostly of borrowers who were converted from a previous iteration of the income-driven repayment plan. The department has said that about 1 million of the borrowers were new sign-ups to the program in recent weeks.

What are the odds Republicans in Congress will succeed in blocking Biden’s newest repayment program?

While the Biden administration has promoted the program as the most generous repayment option in history, Republican lawmakers have blasted the cost to taxpayers of reducing borrowers’ monthly payments and providing new interest subsidies.

Republicans have seized on the program’s $156 billion price tag over a decade, which the Congressional Budget Office and outside experts have said is likely to be significantly higher than that. GOP lawmakers have also argued that the program will provide unnecessary benefits to borrowers at taxpayer expense and potentially incentivize some colleges to raise prices further.

House Republicans have advanced legislation to nullify Biden’s SAVE plan that’s expected to come up for a floor vote in the coming weeks. And there’s a similar effort underway in the Senate.

Republicans are seeking to nullify the repayment plan under the Congressional Review Act, a tool that allows lawmakers to swiftly overturn recently enacted executive branch policies. It will allow Republicans to force a vote on the measure in the Democratic-controlled Senate.

A similar GOP-led effort to repeal Biden’s student debt relief program earlier this year, before the Supreme Court struck it down, passed Congress with a handful of Democratic votes. But Biden swiftly vetoed the measure and there wasn’t enough support to override the veto.

Even if some moderate Democrats again side with Republicans to block the SAVE plan, Biden is sure to once again issue a veto to protect a key student loan priority of his administration.

What is Biden doing to wipe away large swaths of student debt?

The Biden administration has launched a regulatory process to create a new mass debt cancellation program after the Supreme Court struck down its first attempt earlier this year. The Education Department plans to convene public rulemaking sessions this fall where a federal advisory committee will debate potential policy options. Those rulemaking sessions could be delayed in a protracted government shutdown.

At the same time, the Biden administration is also continuing to announce different batches of loan forgiveness that’s targeted at populations of borrowers. Just this last week, the Education Department announced $37 million of loan forgiveness for former students who it determined were misled by the University of Phoenix, one of the nation’s largest for-profit schools.

That’s on top of tens of billions of dollars’ worth of debt relief that it’s previously announced for students who attended other for-profit schools, public service workers and borrowers who have severe disabilities.