Federal student-loan balances will start growing again in one month when interest returns

• Interest on federal student-loan balances will resume in September.
• In October, student-loan borrowers will start making payments again.

Federal student-loan balances will start to grow again in just one month.

In March 2020, former President Donald Trump first implemented the student-loan payment pause, with waived interest, to give millions of federal borrowers financial relief during the pandemic. President Joe Biden later extended the pause numerous times in connection with the pandemic — but his latest extension through October was the last. As part of the bill to raise the debt ceiling that Biden signed into law in June, the president codified the end of the student-loan payment pause, so while it preserves the authority for a president to implement a pause in connection to a different national emergency, Biden cannot do so again as a result of COVID-19.

An Education Department spokesperson confirmed in June that there is no leeway with that provision.

"Student loan interest will resume starting on September 1, 2023, and payments will be due starting in October," a department spokesperson said. "We will notify borrowers well before payments restart."

The payment resumption comes after the Supreme Court struck down Biden's broad plan to cancel up to $20,000 in student debt for federal borrowers. While the Education Department has begun the process of trying again for broad relief using the Higher Education Act of 1965, it could take at least a year because the law requires the administration go through the negotiated rulemaking process, which entails months of negotiations and public comment.

Still, the department has announced a few steps to ease the transition back into repayment, including a 12-month "on-ramp" period during which borrowers who miss payments will not be reported to credit agencies. It also just launched a beta version of its new income-driven repayment plan, known as the SAVE Plan, which would lower borrowers monthly payments and simplify the process for recertification.

However, lawmakers on both sides of the aisle — along with advocates — have expressed concern with the payment resumption. Six Democratic senators, including Massachusetts Sen. Elizabeth Warren and New Jersey Sen. Bob Menendez, recently sent a letter to the CEOs of federal student-loan companies to request information on their plans to support borrowers during the return to repayment in October.

"Our previous correspondence with student loan servicers indicated that they had had little engagement with borrowers throughout the pandemic and were not prepared to support borrowers once payments resumed," they wrote.

And last week, Rep. Virginia Foxx and Sen. Bill Cassidy — top Republicans on House and Senate education committees, respectively — said the Education Department has yet to provide sufficient information on its plan to resume payments.

"The Department doesn't get to ignore their job and then escape accountability," Cassidy said in a statement.
"Inaction by the Department will only harm the 43 million student loan borrowers they oversee."

Still, the department has expressed confidence in its ability to effectively resume payments for millions of borrowers — and it recommends that borrowers who can afford to foot the extra monthly bill should make the payment.

"Although interest will accrue starting September 1st and payments are due starting in October, we'll help borrowers who are struggling to make payments avoid harsh financial consequences, such as delinquencies and wage garnishments," Education Secretary Miguel Cardona previously said. "Borrowers who can make payments should."