The U.S. Department of Education says student loan bills “will be due starting in October.” Interest on their debt will begin accruing even sooner.
Even before that agreement, the Biden administration had been preparing borrowers for their payments to resume by September.recently said at a Senate hearing.The Education Department says borrowers will be expected to make their first post-pause payment in October. Meanwhile, interest will start accumulating on borrowers' debt again on Sept. 1, the department says."Your due date will be at least 21 days after you're sent a loan statement," he said.
For those who still have a balance after the relief, the Education Department has said it plans to"re-amortize" borrowers' lower debts. That's a wonky term that means it will recalculate people's monthly payment based on their lower tab and the number of months they have left on their repayment timeline.
Kantrowitz provided an example: Let's say a person currently owes $30,000 in student loans at a 5% interest rate. Before the pandemic, they would have paid around $320 a month on a 10-year repayment term. If forgiveness goes through and that person get $10,000 in relief, their total balance would be reduced by a third, and their monthly payment will drop by a third, to roughly $210 a month.Biden's loan forgivenessThe borrowers most in jeopardy of defaulting are those for whom Biden's policy would have wiped out their balance entirely, Kvaal said.
"Unless the Department is allowed to provide one-time student loan debt relief," Kvaal said,"we expect this group of borrowers to have higher loan default rates due to the ongoing confusion about what they owe."
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