3 Federal Student Loan Deadlines That Borrowers Should Know About

The U.S. Department of Education building in Washington on June 10, 2024. Madalina Vasiliu/The Epoch Times

While legal battles over President Joe Biden’s efforts to cancel federal student loan debt continue, some student loan-related initiatives have been moving forward.

Since the U.S. Supreme Court shot down an initial plan for a blanket cancellation of up to $400 billion in student loans last summer, the administration has implemented targeted programs through regulatory changes and executive actions.

So far, this has erased nearly $169 billion in debt for 4.8 million borrowers.

In March, a group of 11 Republican-led states filed a federal lawsuit against the Biden administration over the loan repayment plans. And in May, 130 congressional Republicans demanded that the administration withdraw its plan to cancel $147 billion of federal student loan debt. They said it is unfair for Americans who didn’t borrow or have already paid off their loans.

Several important deadlines are approaching as temporary student loan initiatives wind down, while new benefits may soon become available. Here are key dates that borrowers should keep in mind.

Deadline to Opt Out of Plan B: Aug. 30

Earlier this month, the U.S. Department of Education sent notices to about 25 million borrowers who could be eligible for relief under a so-called Plan B, giving them until Aug. 30 to opt out.

The plan primarily benefits those who owe more than they originally borrowed due to accrued interest. It would erase up to $20,000 beyond the principal balance, regardless of the borrower’s income. Some 23 million may even see their entire interest balances eliminated.

The Education Department could also forgive the debt of those who have been repaying for at least 20 or 25 years, those who qualify for loan forgiveness under other programs but haven’t applied, and those who attended schools that lost access to federal aid, suddenly closed, or left graduates financially worse off.

A fifth category of borrowers may get their debt forgiven based on “hardships” that persist after other benefits are exhausted.

The Education Department has defined hardship “indicators” as including age, disabilities, and financial burdens such as medical debt and expensive child care. The specifics are expected to be finalized next year.

Borrowers who don’t wish to be included in potential relief should contact their student loan servicers by Aug. 30 to opt out. Otherwise, no action is needed.

End of “On-Ramp” Period: Sept. 30

During the COVID-19 pandemic, there was a three-year pause on student loan payments, interest, and collections. In June 2023, the Education Department announced a one-year transition period from Oct. 1, 2023, to Sept. 30, 2024, to help borrowers gradually return to paying their monthly bills.

During the on-ramp, payments are due and interest accrues once again, but missed payments won’t be considered delinquent, placed in default, or reported as such to creditors or debt collectors. The theory is that financially struggling borrowers who have long been out of the habit of making payments are at a higher risk of defaulting shortly after repayments resume.

The grace period runs through Sept. 30, after which borrowers will once again face normal consequences of missed payments, including going into default. Defaulting on a loan can damage one’s credit score and may result in the federal government garnishing wages, seizing tax returns, and intercepting Social Security benefits.

Deadline to Sign Up for “Fresh Start:” Sept. 30

For millions of borrowers already in default before the payment pause, the Biden administration offered a one-time option to regain good standing.

Introduced in 2022, the “Fresh Start” program allows borrowers with eligible defaulted loans to apply for federal student aid, such as Pell Grants, so that they may complete their degrees. Borrowers can also make their loans current again, which can improve their credit scores and stop involuntary debt collection.

This option will remain available to all eligible borrowers—typically those who don’t make a payment for at least 270 days—through Sept. 30. However, they must sign up before that date to access the full suite of Fresh Start benefits.

As of this January, the Department of Education held $1.5 trillion in federal student loans for nearly 43 million borrowers.

Of those, about 13.3 million (40 percent) were current on their payments and had scheduled payments of more than $0, according to a recent report by the U.S. Government Accountability Office (GAO). In addition, about 4.5 million borrowers (14 percent) were current and approved for $0 payments as part of income-driven repayment plans.

Meanwhile, another 10 million borrowers (29 percent) were behind on their loan payments. The past-due accounts totaled $290 billion in outstanding loans, according to the GAO.