The pause on federal student loan payments ends Sept 30—here's how to prepare

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When the coronavirus pandemic first swept the United States in March 2020, student debt relief was among the first policies enacted to help struggling Americans. Since March 27, 2020, federal student loan interest rates have been set to 0% and payments have been paused. But the policy is set to expire on Oct. 1, 2021.

The pause has provided significant relief for the roughly 42 million Americans who owe federal student loans. Credit scores among borrowers have increased and the Department of Education estimates that the policy collectively saved borrowers roughly $4.8 billion per month worth of accrued interest.

However, many Americans, including student debt holders, continue to struggle with a difficult labor market and some experts worry borrowers will not be prepared to resume payments.

Here's a timeline of the policy, and what it means for you:  


The CARES Act, passed on March 27, 2020, paused federal student loan payments through Sept. 30 and temporarily set the federal student loan interest rate to 0%.

On Aug. 8, President Donald Trump signed a memorandum ordering Secretary of Education Betsy DeVos to extend student loan relief policies included in the CARES Act through the end of December. 

On Aug. 21, DeVos implemented the measure, providing student loan borrowers with an additional three months of relief.

On Dec. 4, 2020, the relief measures were extended through Jan. 31, 2021.

On President Joseph Biden's first day as president on Jan. 20, 2021, he extended the pause on federal student loan payments through Sept. 30, 2021.

How to prepare

Sarah Sattelmeyer, director of Pew's student borrower success project says that when the Department of Education has implemented student loan forbearances in the past, there often is an increase in student loan delinquency when student loan payments resume. She worries borrowers will face similar difficulties this fall.

"When they turn the switch back on, millions of borrowers are going to reenter repayment all at the same time and that's going to strain and overwhelm the system and servicers. And that could lead to negative outcomes," she says, such as missed payments and default.

Sattelmeyer estimates that roughly 9 million borrowers will be reaching out to their servicers when payments resume and says enacting a grace period for resuming repayment would help ease borrowers back. She also says borrowers should consider enrolling in an income-driven repayment plan, especially if their income has changed during the pandemic.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, tells CNBC that one small thing borrowers can do to make sure they are prepared for payments to resume is to check if their lender has up-to-date contact information since many borrowers have moved during the pandemic.

"You can confirm we have the right info by just logging in to your account online," he says. "That way, you will hear directly from your servicer with all the relevant information on when you will resume repayment."

Ashley Boucher, director of corporate communications for Sallie Mae says "looking ahead" will be key for borrowers as the pause deadline nears. 

"Understand how your finances may have changed as a result of the pandemic," she says. "Are you changing your living scenario? Has your job changed? Has your income changed? What is your new budget?"

Answering these questions can help borrowers create a personalized plan for when federal student loan payments resume. She says she knows of borrowers who have continued to pay down their loans during the pause in order to pay down their loan principal faster. She also says some borrowers have begun building a typical student loan payment back into their monthly budgets by putting payments into a savings account each month, so that they are prepared when Oct. 1 arrives. 

While each borrowers' circumstances vary, Boucher stresses that the biggest thing any borrower can do right now is to check their balances so they have all of the information they need to make the right decision for them. 

"The key, regardless of when you make payments again, is to know who you owe, know how much you owe," she says. "And know how everything is going to fit into this new budget that you may have for yourself."

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