Next Steps for Student Loan Borrowers: Navigating the Post-Moratorium Landscape

There has been a lot of debate and discussion about student loan repayments over the past year, and many apprehensions have surfaced since the Supreme Court rejected the Biden administration’s one-time student loan relief plan. Further, the federal student loan moratorium that started in March 2020 as a response to the COVID-19 emergency and set all student loan interests to 0% for millions of borrowers has now come to an end as student loan repayments have begun for about 37 million borrowers. With this blog, we aim to cut through the noise and inform corporates and their employees about the available facts and resources regarding student loan payment resumption, and guide them on how to navigate the post-September landscape.

First, let’s get some facts straight:

• The student loan interests have started accruing since September 1, 2023. Borrowers will have to begin payments in October.
• The Department of Ed and loan servicers will notify borrowers before payments start. Loan servicers ideally should also provide the billing statements and notices a minimum of 21 days before the first payment is due.
• The resumption of federal student loan payments will increase the monthly payments for borrowers with both private and federal loans even though they might have been paying off their private loans so far.
• For those who graduated during the COVID-19 pandemic, federal loan payments never started – until now. So, they should be cognizant of the fact that they’ll have to make the payments now.
• As a result of fixes to income-driven repayment (IDR) plans implemented by the Biden-Harris Administration since April 2022, a total of $116 billion in student loan forgiveness has been approved for more than 3.4 million borrowers.
• Any borrowers who have accumulated either 20 or 25 years of qualifying months are eligible for forgiveness. There will be direct notifications sent to these borrowers via post or email to let them know when their loans have been discharged.
• In case a borrower qualifies for loan forgiveness under Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, or IDR discharge, the loan servicer or Dept. of Ed. will send notification letters via email or post stating the amount of forgiveness received and the date the loans were discharged.
• The Dept. of Ed. has launched a new plan called the Saving on Valuable Education (SAVE) plan. The beta version of the website for SAVE has been launched.
• The plan is expected to considerably lessen the burden of monthly payments of a lot of low- and middle-income borrowers and provide a shorter timeline for loan forgiveness. Parent PLUS loans and refinanced loans from private lenders are not eligible under the plan.
• The SAVE plan will be launched in stages, hoping to make all program features available until 2024. However, the applications for SAVE are now open to give the Dept. of Ed. a head start to develop the program in its entirety.
• Understanding that the resumption of payments would be harder on some families than others, there is a 12-month “on-ramp” period at the end of the moratorium for those who need it. During this period, the interest will accrue but there will be no penalties like late fees or negative credit reports if borrowers miss payments. Nevertheless, the missed payments will not account for student loan forgiveness for IDRs or PSLFs.
• Borrowers might be eligible for loan deferment or pause payments if they are in dire circumstances. These deferments include In-school deferment, Unemployment deferment, economic hardship deferment, and Cancer-treatment deferment.

Read more about other Loan Forgiveness plans and how to qualify

Read more about Federal Student Loan Debt Relief

Next Steps and Strategies for borrowers to ease into Payment Resumptions

To successfully navigate the post-pandemic landscape, as a student loan borrower you must approach it with cautious planning and well-informed decision-making as you get ready to resume monthly payments in October. You can take proactive measures to efficiently manage your student loan debt by analyzing your financial circumstances, looking into repayment choices and loan forgiveness programs, getting support from loan servicers, and, where appropriate, thinking about refinancing or consolidation. Keep in mind that you are not traveling alone. For assistance and support, get in touch with loan servicers, financial consultants, and online resources.

Review Your Loan Portfolio

Staying at the top of the interest rates, amounts, and loan servicers for all of your federal student loans enables you to make effective plans and offers you a comprehensive view of your debt. Make sure your loan servicer has your most recent phone number and email address so that you get crucial updates and timely notifications.

Assess Your Financial Situation

Take stock of your current financial situation. This involves reviewing your income, expenses, and overall financial obligations. By understanding your financial standing, you can make informed decisions about how to allocate your resources effectively. Budgeting your income and expenses and sticking to it can go a long way. This will help you identify areas where you can potentially reduce spending or reallocate funds to prioritize your student loan payments. Additionally, take advantage of online tools and resources that can assist you in planning and managing your finances better

Seek Assistance from Loan Servicers

Loan servicers play an important role in helping borrowers manage their student loans. They can provide important information about repayment options, loan assistance programs, and options for deferring or deferring repayment in the event of financial hardship. Contact your loan manager to discuss your specific situation and explore the available options. They can guide you through the process and provide you with personalized advice to help you navigate the post-September landscape for success.

Explore Refinancing and Consolidation Options

Exploring refinancing or consolidation possibilities may be worthwhile for borrowers hoping to potentially reduce their interest rates or simplify loan payments. Replacing your current loan(s) with a new private loan that has a lower interest rate is known as refinancing. Consolidation is when multiple federal loans are combined into a single loan with a single monthly payment. Before pursuing refinancing or consolidation, carefully evaluate the potential benefits and drawbacks. It is important to note that refinancing federal loans with a private lender may result in the loss of certain federal benefits, such as income-driven repayment options and loan forgiveness programs.

How can Corporate America help?

Company contributions towards employee student loans help shave off years in repayments and save interest dollars for the beneficiaries. Usually, the contributions are capped to a lifetime maximum and there’s a before and after employment length clause for eligibility making the benefit an effective tool for talent attraction and retention.

Offering Employer Student Loan Assistance Programs

One of the most powerful ways in which Corporate America can help their employees with student loans is by including Student loan repayment assistance in their education benefits portfolio. These programs can take various forms, such as direct financial contributions towards loan payments, employer match programs where employers match a percentage of employee loan payments, or structured repayment plans that incorporate employer contributions. By offering these programs, corporations demonstrate their commitment to employee financial well-being and talent retention. They provide immediate relief to employees burdened by student loan debt and help alleviate the overall impact on their financial stability.

To encourage employers to contribute towards employee student loans, in March of 2020, the IRS changed some rules to allow employers providing educational assistance programs to include student loan assistance in tax-exempt contributions of up to $5250. Further, the Consolidated Appropriations Act of 2021 brought about an extension – till 31 December 2025 – on Section 127 of the Coronavirus Aid, Relief and Economic Security (CARES) Act that made employer’s student loan repayment contributions up to $5,250 tax-exempt. Making this the right time to roll out these benefits to attract and retain your workforce.

Edcor through its Freedom Program offers Student Loan Repayment assistance services. The services are broadly categorized under Repayment assistance, Refinancing or Financial planning, and Counselling resources for Client employees. Edcor’s unique offering to Clients includes flexible and customized solutions, advising for HR policy writing tied to upskilling and retention goals, and linking the employee’s student loan repayments and tuition assistance to the CARES Act for benefit maximization.

Providing Financial Education Resources

Corporate America can also play a critical role in empowering their employees with financial education resources specifically tailored to student loan debt management. By offering workshops, webinars, or access to online educational materials, employers can help their workforce gain a better understanding of loan repayment options, federal loan forgiveness programs, and strategies for managing their debt effectively. Such resources can equip employees with the knowledge and tools to make informed decisions about their student loan repayments.

Resources for Student Loan Borrowers Returning to Repayment courtesy New America.

Feel free to reach out to us for more information and resources.