For many borrowers, the new IDR plan could be a better option.
Federal student loan payments will resume in October — but a 12-month “on-ramp” will protect borrowers from the worst consequences of skipping student loan payments.
It’s not a continuation of the interest-free pandemic payment pause, however.
“During this period, if you can pay your monthly bills, you should,” President Joe Biden said in a June 30 press conference. “But if you cannot, if you miss payments, this ‘on-ramp’ will temporarily remove the threat of default or having your credit harmed, which can hurt borrowers for years to come.”
Just because you can postpone student loan payments for up to a year doesn’t mean you should. Here’s what you need to know about the student loan on-ramp, the consequences and alternatives.How does the on-ramp work?
The on-ramp will run from Oct. 1, 2023, to Sept. 30, 2024. You don’t need to sign up for the on-ramp; it’s automatic. So if you simply don’t pay, it’ll be in effect.
During this time, borrowers who don’t pay their monthly student loan bills can expect the following benefits and drawbacks:Benefits of the on-rampDrawbacks of the on-rampTreat the on-ramp as a safety net
The on-ramp is designed for the “most vulnerable borrowers,” the White House says.
Borrowers should treat the on-ramp as a safety net rather than a repayment strategy, says Michele Shepard, senior director of college affordability at The Institute for College Access & Success, a nonprofit that advocates for equitable and affordable higher education.
