How to get help when student loan payments restart

For 42.9 million student loan borrowers , it’s been 18 months without a payment. That ends in October — ready or not.

The interest-free federal student loan payment pause, known as a forbearance, was extended three times after it initially went into effect in March 2020 as a way to help reduce the financial blow many borrowers experienced as a result of the pandemic.

Loan servicers are already fielding thousands of calls a day from borrowers seeking help, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade organization.

Time is running out for both servicers and loan borrowers to prepare for repayment.

While Education Secretary Miguel Cardona has indicated it’s not “out of the question” to extend the loan forbearance beyond Sept. 30, for now borrowers should be prepared for bills to come due sometime in October.

Talk with your servicer

Servicers are expecting borrower demand for help to increase and may have trouble keeping up. The repayment system has never been turned off before, so no one is sure what restarting it simultaneously for 42.9 million people will look like.

Despite the uncertainty, if you’re worried about your ability to make payments, there’s no downside to contacting your servicer now. Ask about your best options to manage payments, depending on your situation.

If you’re not sure who your servicer is, log in to your My Federal Student Aid account to find out.

Repayment options

“Your options are not ‘pay or default,’ ” says Megan Coval, vice president of policy and federal relations at the National Association of Student Financial

Aid Administrators. “There are options in between for lowering payments. Nobody, including the federal government, wants to see you go into default.”

Default happens after roughly nine months of late federal loan payments. It can result in a damaged credit score, wage garnishment, withheld tax refunds and other financial burdens.

■ If payments will be a hardship: Enrolling in an income-driven repayment plan sets payments at a portion of your income, which could be $0 if you’re out of work or underemployed. Or you could opt to pause payments (with interest collecting) using an unemployment deferment or forbearance.

■ If you were delinquent before the pause: Your loans will be reset into “good standing.” Making monthly payments on time will help you retain that status. But if you think you might miss a payment or you don’t think you can afford payments altogether, contact your servicer about enrolling in an income-driven plan.

■ If you were in default before the pause: Contact your loan holder or the education department’s default resolution group to find out how to enter into loan rehabilitation and get back into good standing.

Find a legit resource

Servicers may be your first point of contact, but they don’t have to be your last.

You may have other needs your servicer isn’t providing, such as financial difficulty beyond your student loans or legal advice.

Cash-strapped borrowers can find legitimate student loan help for free with organizations such as The Institute of Student Loan Advisors. Other student loan help, such as a credit counselor or a lawyer, will charge fees. You can find reputable credit counselors through organizations such as the National Foundation for Credit Counseling.

Financial planners can also help, but it’s best to look for one with student loan expertise.

If your issue is with your servicer, contact the Federal Student Loan Ombudsman Group.