The student loan payment pause ends in January, following President Biden’s last extension.
Most federal student loan borrowers have not had to make any payments on their loans for over 18 months due to the ongoing national payment pause. Earlier this year, President Biden extended the payment pause again to January 31, 2022. The Biden administration has characterized this as the final extension of the payment moratorium for student loans. That means millions of borrowers will have to resume repayment by February.
Many student loan borrowers use autopay programs (also known as automatic debit), where student loan payments come out of their checking account automatically each month. This can simplify repayment management, reduce the chances of accidentally missing a payment and incurring late fees, and can even result in a bit of an interest rate reduction. But if you were paying your student loans through autopay or auto-debit before the student loan payment pause went into effect last year, don’t assume that your autopay will automatically resume in February, or that things will go smoothly.
The Department of Education is grappling with major changes to its student loan servicing system, just as borrowers are nearing the end of the national student loan payment pause. Three major student loan servicers — Navient, FedLoan Servicing, and Granite State Management & Resources — have all recently announced their departure from the Department’s federal loan servicing system. As a result, millions of borrower accounts will have to be transferred to new loan servicers in the coming months.
Borrowers who had set up automatic payments before the payment pause, and then have their accounts transferred to a loan servicer, will have to re-establish an autopay arrangement with the new servicer after the transfer takes place. Your autopay information and authorization does not transfer over to the new servicer.
Borrowers should make sure that their contact information — including their mailing address, phone number, and email address — are all up to date, as the Department of Education will be notifying borrowers of servicing changes in the coming months.
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Even if your student loan servicer isn’t changing, you still may need to review your autopay arrangement with your current servicer, and you may need to renew it or reaffirm it. Navient, for example, posted the following message on its website: “Auto Pay Confirmation Required — For borrowers with Department of Education owned loans that are in the COVID-19 payment suspension, you must act now if you’re enrolled in Auto Pay to ensure your Auto Pay payments resume after the COVID-19 payment suspension ends. Log in below to opt in or out of your Auto Pay enrollment.”
If you’re unsure whether your autopay will start back up again in February, you may want to reach out to your loan servicer for more details.
If your autopay resumes again in February and you don’t have to worry about loan servicing changes, it may still be a good idea to check in with your servicer about your monthly payments, to make sure that you will be able to afford them.
For borrowers who were on an income-driven repayment plan, your payments will likely be based on your most recent income recertification. That could be as far back as late 2019, if you haven’t re-certified your income since then. If your income or financial circumstances have declined since that time, you may want to consider requesting a recalculation of your monthly income-driven payment based on those changed circumstances, before payments resume in February. Otherwise, a substantial payment may be automatically withdrawn from your bank account.
For borrowers who were not on an income-driven plan when the payment pause began, but whose financial circumstances have nevertheless declined since March 2020 (when the payment pause first went into effect), you may want to consider alternative repayment plan options, including income-driven repayment plans, before automatic payments resume.
And remember — borrowers can opt out of autopay and manually make their payments each month.