When do student loan repayments start? The debt ceiling deal gives a firm deadline

For more than three years, tens of millions of federal student debt holders haven’t had to think about saving for or paying off their loans, but that’s all ending very soon.

In the wake of the debt ceiling deal hammered out between President Joe Biden and House Speaker Kevin McCarthy, millions of former students will see their student loan payments and accrual of interest on those loans resume as early as late August.

The pause, first implemented by former President Donald Trump, was a welcome relief after COVID-19 sparked an economic downturn that made it more difficult for many who'd borrowed tens of thousands of dollars to pay for their schooling to keep up with payments. Biden extended the pause and its 0% interest rate multiple times despite growing pressure to lift the moratorium.

But last week, in exchange for a raised debt ceiling, the Biden administration agreed, among other things, that it wouldn’t renege on the “final” pause like it did last year. Last August, the administration said the fourth and “final extension” would expire on Dec. 31, 2022, but by November, it extended that deadline to either 60 days after the Supreme Court issues a decision on the relief program or 60 days after June 30 – whichever came first.

Without a Supreme Court ruling before June 30, the end of summer is when payments restart, and interest begins adding up again. Sixty days after June 30 is Aug. 29.

“People should know the clock starts ticking and interest starts accruing,” said Scott Buchanan, executive director at the Student Loan Servicing Alliance trade organization. "They should start contacting their servicers now."

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What if the Supreme Court makes a ruling?

The repayment pause is separate from a Biden proposal that would forgive an estimated $400 billion in student loan debt, a much-debated plan under review by the Supreme Court.

At this point, a Supreme Court ruling striking down the administration’s plan to cancel up to $20,000 in debt for about 45 million Americans with federal loans would only start the clock slightly earlier in August.

If the Supreme Court says student loan forgiveness can go ahead, about 25 million Americans would still have to start paying. That’s because, of the roughly 45 million people who hold student debt, Biden said about 20 million would have their debt completely erased, leaving 25 million who would still have to make some payments. The payments may just be smaller due to shrunken balances from forgiveness.

There’s an off-chance people would have to start repaying even sooner than August. Congress passed a bill to overturn Biden's student-debt cancellation and throw borrowers back into repayment immediately. If the bill gets to Biden’s desk, though, he’s said he will veto it, leaving the debt ceiling agreement at the forefront.

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What should I do first to prepare?

According to Federal Student Aid, an office of the U.S. Department of Education, the first thing borrowers should do is create a StudentAid.gov profile or make sure their contact information is current to avoid missing crucial updates. A profile also lets borrowers apply for repayment plans and complete loan counseling.

Then, contact your loan servicer. Now, not later, to save yourself from long hold times.

Facing a cash crunch, the Department of Education modified its contracts with loan servicers that included cutting the pay they earn servicing each borrower and the minimum number of hours customer service centers must open each week. Those cuts translate into fewer servicers working fewer hours to help people coming off a fifth consecutive payment pause.

Individuals who aren’t sure who their loan servicer is can log into their StudentAid.gov profile and view those details under the “My Aid” section. Once you connect, servicers can remind you what your payments and responsibilities are, help you enroll in affordable repayment programs and manage other logistics of paying student loan bills. If you had autopay before March 13, 2020, you must reenroll in autopay. Your payments won’t automatically restart.

“It’s going to be very busy for at least a couple of months with longer hold times,” Buchanan said. “It’s just a matter of whether it will be 30 minutes or two hours.”

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Can I do these things online?

Yes, you can update your contact information in your profile on your loan servicer’s website and in your StudentAid.gov profile. On your loan servicer’s website, you’ll also be able to register for autopay or reenroll. It’s important that if you were enrolled in autopay before March 13, 2020, and have not reenrolled since, you must opt-in again, or else your payments won’t restart.

On the StudentAid.gov website, you can check out Loan Simulator to find a repayment plan that meets your needs and goals or to decide whether to consolidate. You should consider applying for an income-driven repayment (IDR) plan. An IDR plan can make your payments more affordable, depending on your income and family size, and IDR plans have been modified to appeal to more people. Plans can also be readjusted later depending on one’s financial situation.

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When can I expect my first bill?

Once the payment pause ends, you’ll receive your billing statement or other notice at least 21 days before your payment is due. Those statements should include the payment amount, due date and any upcoming interest.

In the meantime, you can get an estimate of your payment amount and due date through your loan servicer online or by phone.

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What if I can’t pay?

◾ Check your employee benefits. “Look into whether your employer offers any form of student debt assistance – whether it’s direct payment support, access to a financial adviser, or a student loan management solution that can help you easily understand and pay down your debt,” said Edward Gottfried, product director at financial wellness benefits company Betterment at Work.

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For example, Aetna matches employees’ U.S.-based student loan payments up to $2,000 a year for a lifetime maximum of up to $10,000 for qualifying loans; PwC offers associates and senior associates up to $1,200 a year toward student debt; and Google matches up to $2,500 a year.

◾ Start cutting expenses and pick up a side hustle. The job market is cooling but still pretty strong, so you may be able to find extra work. In the meantime, Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit based in Plymouth, Massachusetts, said individuals should reevaluate their expenditures and stop spending as though the debt is forgiven. She suggests borrowers set up interest-bearing accounts into which they can deposit amounts equal to their anticipated monthly payments. While the interest on those accounts can be beneficial, what’s more helpful is the practice of budgeting and forming a new routine around those payments, Mayotte said.

◾ Check if you’re eligible to lower your payments with a new plan. You can speak to your servicer or use the online Loan Simulator for options.

◾ As a last resort, contact your servicer to request a temporary pause or lower payments through short-term relief (deferment or forbearance). Remember, interest may be charged during deferment or forbearance. Deferment and forbearance also affect loan forgiveness options, such as Public Service Loan Forgiveness or IDR plan forgiveness.

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What if I miss a payment?

A missed payment means your loan is delinquent. If your loan is delinquent for 90 days or more, your loan servicer will report the delinquency to the three major national credit bureaus. Delinquency will affect your credit score, making it harder to get credit.

After 270 days of delinquency, you’re in default and can lose your access to more student aid and damage your credit score.

The government can also take your tax refund, part of your Social Security benefits, or up to 15% of your paycheck to pay off your defaulted loan.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

Contributing: Chris Quintana

This article originally appeared on USA TODAY: Student loan repayment is back on: What to know before the pause lifts