The suspension of federal student loan payments that began in the early days of the COVID-19 pandemic is soon coming to an end.
More than three years after payments were paused and interest rates on the loans were reduced to 0% in March 2020 during the Trump administration and extended multiple times under President Joe Biden, student loan interest will begin accruing again on Sept. 1 and payments will be due in October.
The Department of Education told FOX Business this week it will notify the more than 40 million student loan borrowers "well before payments restart."
Although the Supreme Court is currently weighing whether the Biden administration can move forward with its proposed plan to forgive up to $10,000 in federal student loan debt for borrowers and up to $20,000 for those who received Pell Grants, the repayments will begin regardless of what the court decides.
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Despite the years-long break, resuming the payments will no doubt mean pain for many borrowers.
During the pause, Americans' budgets have been increasingly squeezed coming out of the pandemic due to sky-high inflation fueled by a surge in demand, Russia's war in Ukraine and exploding government spending.
Meanwhile, wage increases have failed to keep up with rising prices, and U.S. household debt is now at a record $17 trillion – with a growing number falling behind on payments for several types of loans.
But those who fail to make their student loan payments face delinquency and eventual default, which can come with stiff penalties. Beyond damaging their credit scores, borrowers in default could be prohibited from receiving additional aid and government benefits.
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Experts encourage anyone concerned about being able to make their student loan payments to consider an income-based repayment plan, which considers a borrower's expenses in determining payment amount. Borrowers can determine eligibility at the Federal Student Aid website.
Current and former government or nonprofit employees may also be eligible for the Public Service Loan Forgiveness Plan, which forgives student debt after 10 years.
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Borrowers may also seek a further pause on their loans with deferment or forbearance, but under these situations, the loans still do not go away and interest can still accrue.
The Associated Press contributed to this report.
