The lengthy reprieve that federal student loan borrowers enjoyed is about to end. A key provision in the debt ceiling agreement reached in June 2023 prohibited the U.S. Department of Education from extending the pause on repayments of student loans that began in March 2020.
As a result of this debt ceiling deal, student loan repayment begins on Oct. 1 for most borrowers (although not everyone has the same due date). However, here are three exceptions to the rule.
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1. Borrowers who are still in school or recently left school
If you’re still enrolled at least half-time in school, you won’t have to make any payments on your federal student loan unless you leave school. Even if you’re no longer in school, you won’t have to make payments in October if you’re still in the grace period.
For most federal student loans, the grace period is six months from the time you left school. This applies to anyone who has graduated or dropped out of school for any reason. The grace period also applies if you are still in school but are attending less than half-time. Should you be called to active military duty for more than 30 days before your grace period ends, your six-month grace period will restart once you return from active duty.
There’s one twist to all of this for Perkins Loans. Instead of a six-month grace period, borrowers receive an initial grace period of nine months.
2. Borrowers who have received deferment or forbearance
You won’t have to resume repayments if you have already received deferment or forbearance for your federal student loan that delays your payments beyond October 2023. Note that both allow you to temporarily postpone your payments. However, interest will always accrue on loans in forbearance but won’t accrue for certain types of federal student loans in deferment.
Borrowers can request forbearance if they can’t make their loan payments for several reasons, including encountering financial difficulties, having to pay medical expenses, or changing employment. Your loan service provider could also accept other reasons for loan forbearance.
There are several ways to qualify for deferment on your federal student loan. They include:
- Cancer treatment. Individuals undergoing cancer treatment can receive a deferment during the treatment period and for six months afterward.
- Economic hardship. Some borrowers can qualify for an economic hardship deferment of up to three years if they meet certain criteria.
- Graduate fellowship. Students enrolled in an approved graduate fellowship program can have their student loans deferred.
- Military service. Borrowers who are called to active military duty in connection with a military operation, national emergency, or war can also be eligible for deferment.
- Rehabilitation training. Individuals enrolled in an approved rehabilitation training program focused on alcohol abuse, drug abuse, mental health, or vocational rehab treatment can be eligible for this type of deferment.
- Unemployment. Borrowers who receive unemployment benefits or are unable to find full-time employment can have their federal student loans deferred for up to three years.
3. Borrowers whose repayment amount is zero
The Biden administration’s Saving on a Valuable Education (SAVE) Plan reduces loan payment amounts for most borrowers. For some, the repayment amount will be zero. This will be the case if your adjusted gross income is no more than 225% of the poverty level established by the U.S. Department of Health and Human Services.
If you’re single and earn $32,800 or less per year, you won’t have to pay anything on your federal student loans. If you have a family of four with a household income of $67,500 or less (with a higher threshold in Alaska and Hawaii), your loan amount will also be zero.
One important tip
If you have federal student loans and don’t fall into one of the exception categories, you’ll want to enroll in automatic payments with your loan service provider. It can reduce your interest rate by 0.25%.
However, if you were enrolled in auto-pay before the federal student loan repayment pause, don’t assume that you’ll still be enrolled in October. Make sure by going to your servicer’s website.
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