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After more than three years of a pandemic-era moratorium, student loan payments resumed in October 2023. But a year-long "on-ramp" period gave borrowers the breathing room to avoid the impacts of delinquency or default if they were unable to make payments.
As of October 1, 2024, late student loan payments can once again impact your credit score. If you aren't already making payments, it's crucial to resume doing so now or enroll in a payment plan to avoid damage to your credit. Here's what you need to know.
Begin Repayment Now to Avoid Credit Damage
Student loan payments became due in October 2023, after three years of a pandemic-era pause. But the Biden administration implemented a 12-month grace period to give borrowers a safety net during the transition. During that grace period, missed payments weren't reported to the three major credit bureaus (Experian, TransUnion and Equifax), and didn't negatively affect borrowers' credit.
The on-ramp period ended September 30, 2024. As of October 1, 2024, the consequences of missing monthly payments are back in effect.
How Will the End of the On-Ramp Period Affect Me?
Because everyone's credit situation is different, the actual impact of making or missing student loan payments can vary. The most important thing to keep in mind is that if you aren't already making payments, you'll need to start now to avoid hurting your credit. Having a history of missed payments on your credit report can make it more difficult to qualify for favorable terms if you need to borrow down the line, such as to buy a house or a car. On the flip side, positive payment history on your loans could help you build good credit.
Learn more >> What Happens if I Default on a Loan?
How to Handle Student Loan Repayment
Depending on your situation and budget, there may be several ways you can approach paying down your student loans. The simplest, of course, is to make your regular payment on time, ideally on autopay so you never miss a payment.
However, if you're worried you may not be able to make regular payments, consider these options.
Look Into Income-Driven Repayment Plans
The Department of Education currently offers two different income-driven repayment plans borrowers can apply for:
- Saving on a Valuable Education (SAVE) Plan
- Income-Based Repayment Plan
(The Pay As You Earn Repayment Plan and Income-Contingent Repayment Plan stopped accepting new enrollments as of July 1, 2024.)
Each of these plans can reduce your monthly payment to 10% to 20% of your discretionary income. Income-driven repayment plans also extend your repayment plan up to 20 or 25 years, after which any remaining balance is forgiven.
Keep in mind that for some borrowers, an income-driven repayment plan could lower payments to as a low as $0 a month. You can use the StudentAid.gov loan simulator tool to estimate what your payments would look like under various repayment plans based on the specifics of your financial situation.
Learn more >> How to Choose the Best Student Loan Repayment Plan
Make a Budget
If you don't already have one in place, create a budget to help you understand exactly where all your money is going. Your budget will help you make sure you have enough cash flow for your student loan payment, along with your other expenses.
Start by writing down your income and expenses from the past few months. Consider using a budgeting app to make automatically tracking and sorting your spending easier.
Once you have a clear view of your current financial situation, start planning how you want (and need) to spend your money for the upcoming months. Be sure to include your student loan payment. Check with your loan servicer to confirm your exact payment amount, as it may have changed.
Learn more >> How to Make a Budget
Be Cautious About Refinancing
Student loan refinancing can be another way to reduce your monthly payments. When you refinance your student loans, you take out a private student loan and use it to repay your federal loans. Then, you repay the private loan over time. This can be advantageous in some cases, such as if you have good credit and can qualify for a private loan with a competitively low interest rate.
That said, private lenders typically don't offer income-driven repayment plans, and their forbearance options are often less generous than what the federal government provides. So while it's worth considering in some cases, be sure to weigh other options and consider the long-term impacts before you decide to refinance your student loans.
Contact Your Lender if You Can't Afford Your Payments
If you've reviewed the strategies above and still believe you may be unable to make payments, contact your student loan servicer right away to understand your options.
For example, the federal government offers forbearance and deferment for people experiencing financial difficulties. Your eligibility may depend on your situation, so contact your student loan servicer directly for more information. These options can provide immediate relief and potentially help you get to where you need to be financially to continue paying down your student loan debt.
Learn more >> Options if You Can't Pay Your Student Loans
Monitor Your Credit as You Pay Down Your Debt
As you begin to make payments again, it's also important to keep track of your credit. With Experian's free credit monitoring service, you can keep track of your FICO® Score☉ and regularly review your Experian credit report to understand what impacts your score and to address issues as they come up.
You'll also get real-time alerts when changes are made to your credit report, such as a new account or inquiry. As you monitor your credit, you'll be better positioned to build a strong credit history and prevent potential negative items from doing damage to your credit score.