12 things student loan borrowers should know about the return to repayment

All good things must come to an end.

For three and a half years, tens of millions of federal student loan borrowers have enjoyed an unprecedented respite, not only from their loan payments but from the accumulation of interest on top of those loans. Countless books and doctoral theses will be written about what that money paid for instead; what matters today, though, is that interest resumes its inexorable march come September and, in October, so do loan payments.

Here's the problem for borrowers: A lot has happened over the past few years. Their lives have likely changed – perhaps dramatically – and, like them, so has the student loan system itself. Some of the biggest loan servicers pre-pandemic are gone, their borrowers shuffled to other servicers, and a new, more generous repayment plan awaits low-income borrowers.

It's a lot to navigate – but don't worry, we're here to help. NPR's Education Desk has been covering student loans for years. We've published investigations into mismanaged loan programs, and then written about the fixes that came out of those stories. And most importantly, we've been following every development in the pandemic payment freeze. It's a lot. So...

Here's a list of 12 things borrowers should know as they return to repayment.

1. It's time to log into your student loan portal (no really, stop putting it off!)

First thing's first. Many borrowers haven't checked in on their loans in months – in some cases, years. Or ever (I see you, younger borrowers)! That's fine. This is a guilt-free zone. But it's time to get online and get reacquainted – or acquainted for the first time.

Go to the U.S. government's federal student loan portal. You'll need your FSA ID to access your account. If you don't have one, or don't remember it, it could take some time. So don't delay.

Once you're logged in, make sure your contact information is up to date. If your email or brick-and-mortar address has changed, the U.S. Education Department and your servicer need to know.

Speaking of servicers, while you're there, you can find out who your servicer is now. It may be a name you've never heard before, like MOHELA (in case you're curious, it's moh-HEE-lah). Millions of borrowers got shuffled around during the pandemic. Don't be alarmed if you're one of them.

From there, you'll need to go to your servicer's website and add or update your contact information there too. Redundant? Perhaps, but you need to do it. If they can't find you, they can't bill you – but that won't keep your loans from ballooning with interest.

If all of this requires you to go down a rabbit hole remembering old passwords or your FSA ID, take a moment now to save them somewhere. Because moving forward, if you didn't before, you should make a habit of checking in on your loans every month or two.

If you can't figure out how to log into the government's portal, you can always call for help: 1-800-4-FED-AID (1-800-433-3243).

2. Figure out the repayment plan that makes sense for you

The kind folks at the Department of Education's office of Federal Student Aid have built a handy tool to help you do just that. It's a loan simulator, and it will ask you all sorts of life questions, like whether you're currently employed, or paying for health insurance, or married (with children). It'll ask you where you went to school, how much debt you have and how much income you're earning. And then it will let you choose your plan based on how you answer the most important question of all ...

3. What is your repayment goal?

Do you want to pay as little money as possible in the short-run... or the long-run? For the long-run, the traditional, "standard" 10-year plan is almost certainly your best bet. You'll have larger, fixed payments right out of the gate – but that also means you'll end up paying the least amount of interest over time compared to other, more stretched-out plans.

The "graduated" plan works similarly, though you'll start with smaller payments that then get big enough over time that you'll still repay the loan in 10 years.

If shorter-term affordability is more your priority...

4. You might qualify for a $0 monthly payment!

If you're a young earner and want/need a low monthly payment, great. The Biden administration's new income-driven repayment plan, known as the SAVE plan, might be a good fit. If you're single and earn less than about $33,000, you should qualify for a $0 payment.

Among the many new perks with this plan: As long as you're paying each month what the government thinks you can afford, then it will waive any leftover interest not covered by your payment. For example, let's say your loans accrue $60 in interest every month, but your monthly payment is just $40. The government will waive the remaining $20 in interest. But don't be fooled. There's still interest, and you may end up paying a ton of it over the life of the loan.

Another example: Let's say you earn $40,000 and need to pay back $32,000 in federal student loans. According to the department's loan simulator, the cheapest way to do that, long-term, is to repay on the standard 10-year plan, with a $322 monthly payment. That plan would have you paying back a total of roughly $39,000 with interest.

On the other hand, under the SAVE plan, your initial payment would be just $60 a month. But, with interest, you'd be paying $49,400 over the life of the loan. This is really important. If you're making a small payment, say $60, it's possible much or even all of it would go toward interest.

Your loan won't grow, but it won't shrink quickly either. That's where loan forgiveness comes in.

5. Yes, loan forgiveness is still a thing

OKAY, deep breath... yes, the loan forgiveness landscape has been confusing. President Biden's big loan relief plan, to erase between $10,000 and $20,000 of student loan debt for most borrowers, was struck down by the U.S. Supreme Court. But there are other loan forgiveness options that are very real and plentiful.

Like Public Service Loan Forgiveness. Sure, you've seen stories about how poorly managed the program was (many of which came from NPR), but the Biden administration has since overhauled PSLF, making it easier to navigate. The rules are still roughly the same: work for 10 years in public service (in government or for a qualified nonprofit) while making 120 qualifying payments and your remaining balance will be forgiven. If this rings your bell, you should consider the new SAVE plan. There's no point paying hefty monthly sums upfront, through the standard 10-year plan, if you think you will qualify for forgiveness in 10 years anyway. Also, don't worry if you logged three years as a teacher, dabbled as a stock broker, then went back to teaching. The years of service don't have to be consecutive.

Income-driven repayment plans also come with different levels of forgiveness. Typically, it's 25 years for graduate school debt and 20 years for undergraduate debt. The new SAVE plan will also include a new tier of forgiveness for low-debt borrowers: folks who take out $12,000 or less can qualify for forgiveness after 10 years, though that part of the plan won't go into effect until July of 2024.

One last thing to consider as you weigh your odds of loan forgiveness...

6. You may get retroactive credit toward forgiveness

If I could write this section in neon, I would.

Right this minute, the Education Department is reviewing the records of millions of borrowers and giving them retroactive credit toward forgiveness for time already spent in repayment – time that didn't previously qualify: months in forbearance, deferment or other repayment plans.

This means, for older borrowers, enrolling in an income-driven repayment plan now, for the very first time, could come with 10, 15 or even 20 years of back credit toward loan forgiveness. Here's a quick explainer re: why that's happening and what it means for borrowers.

Skeptical? Earlier this summer, the first wave of borrowers – more than 800,000 of them – had their debts erased after receiving this retroactive account adjustment.

And next summer could bring a mini-explosion of loan forgiveness. Again, that's when the SAVE plan's new, 10-year forgiveness promise kicks in for borrowers with original loan balances below $12,000. Well, lots of these borrowers are in a position to get at least 10 years of back credit. Meaning, the moment the policy begins they'll qualify to have their debts erased.

7. Borrowers with old federal loans may want to consolidate

Millions of borrowers still have old loans known as FFEL Program loans. These date back to the days when federal loans were backed by the U.S. government but held by private banks, and these borrowers have gotten used to being excluded from previous loan relief efforts.

But it's not too late for FFELP borrowers to qualify for Public Service Loan Forgiveness or forgiveness under that big, retroactive account adjustment the Education Department is doing right now. They simply need to consolidate their old loans into a new federal, Direct Consolidation Loan by the end of 2023, according to the Education Department.

8. Consider enrolling (or re-enrolling) in auto pay

If you tend to pay your bills at the last minute and have been known to miss a deadline or two, consider enrolling in auto pay. You'll even get a 0.25% cut on your interest rate.

If you were enrolled in auto pay before the pandemic, the Education Department says you'll likely need to re-enroll. So don't sit back and assume that train will roll without a fresh nudge.

9. There's an on-ramp for all of this

For the next year, the Biden administration is trying to ease borrowers into repayment by not reporting them to the credit agencies if payments are late or missed altogether. But don't take that as a license to wait. Interest will keep growing, whether or not you're making payments.

10. Avoid default

If a borrower goes 270 days without making a payment, they'll go into what's called default, which is a place so awful only Dante could do it justice. Default destroys a borrower's credit and allows the government to dip into your wages, tax refund and Social Security. In short, the government's likely going to get its money the easy way, or the hard way. Try the easy way first.

If you can't afford a monthly payment right now, that's fine – check out the SAVE plan. You may qualify for a $0 payment. You can also call your loan servicer and request a temporary forbearance or deferment – not as good as being on a repayment plan but preferable to default.

11. Borrowers already in default are being offered a "Fresh Start"

This is a big deal, but this fresh start requires that you opt in – it's not entirely automatic. If you're in default, you need to reach out to whoever holds your loan. That may be a guaranty agency. You can find a list of agency contacts here.

If your loans are still held by the U.S. Department of Education, you can initiate the fresh start process by going to this website or calling 1-800-621-3115. As part of that process, you'll be able to enroll in the new SAVE income-driven repayment plan, which should help keep your monthly payments reasonable while also keeping you out of default. According to the Education Department, half of Fresh Start borrowers currently have a $0 monthly payment.

12. Don't wait. Your servicer may be understaffed

NPR reported back in January that the federal office that oversees student loans has been flat-funded for the year, and it's now passing on its budget crunch to the servicers it pays to deal with borrowers. Several months ago, it gave those servicers permission to cut student loan call center hours. Now do the math:

More than 40 million borrowers returning to repayment + loan servicers cutting service = a whole lotta hold music, depending on your servicer and when you call.

So, if you can, try to get back on track online. You might be surprised by how useful the Education Department's loan tools can be.

And if you still have a question, don't wait till Oct. 1 to call your servicer.

Edited by: Nicole CohenVisual design and development by: LA Johnson [Copyright 2023 NPR]