The “on-ramp” repayment plan, which provided a grace period for student loan borrowers after pandemic-related payment pauses ended last fall, will come to an end on Monday, Sept. 30. After this date, borrowers will once again face consequences for missed or late payments. This development comes as the Biden Administration’s broader student debt relief efforts are facing legal challenges.
This 12-month safety net shielded student loan borrowers from negative credit reporting, delinquency or default status, and referral to debt collection agencies for missed or late payments. It’s important to note that interest still accrued on their loans during this period. Approximately 43 million Americans hold a collective $1.5 trillion in student loan debt.
“For millions of borrowers, this will be the first time they experience the negative economic repercussions of falling behind on student loans,” explains Aissa Canchola Bañez, policy director of the nonprofit Student Borrower Protection Center (SBPC). “I believe this is a crucial piece of context when discussing the seriousness of this safety net protection expiring.”
Canchola Bañez works for one of over a hundred advocacy, labor, and civil rights groups that sent a letter on Sept. 19 to Department of Education Secretary Miguel Cardona, urging an extension of both the on-ramp period and the Fresh Start program, which helped borrowers who had defaulted on their federal student loans. Both initiatives are scheduled to end on Sept. 30.
However, advocacy efforts proved unsuccessful. “There are no plans to extend the on-ramp period. Borrowers should visit to learn more about available repayment options,” a Department of Education spokesperson told TIME in a statement.
Advocates argue that the end of the on-ramp plan program coincides with increased instability for borrowers impacted by lawsuits restricting aspects of Biden’s student loan forgiveness initiatives. “We have borrowers who are genuinely struggling to afford their payments and are unable to access some of the most affordable repayment options,” says Canchola Bañez. “This is likely the worst time to consider ending a safety net like this, as our most vulnerable borrowers lack easy access to affordable repayment options right now.”
Beyond the June 2023 halting of the Administration’s broader program, which would have forgiven $400 billion in loans, recent legal challenges have also targeted elements of the Saving on a Valuable Education (SAVE) student loan repayment plan, which the Department of Education labeled the “most affordable repayment plan ever.” This plan is currently blocked, and borrowers have been placed in interest-free forbearance. The states involved in these lawsuits argue that President Joe Biden requires Congressional approval to provide loan relief under SAVE.
Eight million borrowers currently enrolled in this program were scheduled to receive loan forgiveness after making 20-25 years of payments.
What should borrowers know?
Moving forward, borrowers should be aware of the potential financial harm, including a decrease in their credit scores, if they fail to make payments towards their student loans.
Starting in October, consumers with a payment that is 90 days past due could see their credit reports impacted in January, Liz Pagel, senior vice president of Consumer Lending at TransUnion, stated to TIME. “Unlike other credit products, student loan payments are not marked delinquent until they reach 90 days past due. These delinquencies will affect credit scores.”
Borrowers missing payments for 270 days could face loan default, which could lead to the garnishment of their personal social security, tax refund, and wages.
While the Department of Education cannot currently process any new applications for the SAVE plan due to ongoing lawsuits, Canchola Bañez clarifies that borrowers can still apply for income-driven payment plans, including SAVE. Paper applications for SAVE are currently being accepted. (Online applications are indefinitely closed.)
Borrowers should also be vigilant about the actions of their loan servicer. Most recently, faced accusations from the U.S. Consumer Financial Protection Bureau (CFPB) of misleading student loan borrowers and failing to properly process payments.
“If your servicer provides inaccurate information or gives you the runaround, submit a complaint to the CFPB, the student loan ombudsman, or the FSA ombudsman at the Department of Education, as these are the mechanisms we, as advocates and policymakers, use to monitor harmful trends,” she advises.