Student Loan Relief Expiring: Implications for Borrowers

Person carries a sign during a Cancel Student Debt rally outside the US Department of Education in Washington, DC, on April 4, 2022.Photo byStefani Reynolds/AFP via Getty Images

For the past year, millions of American student loan borrowers who had taken out federal loans have benefited from a significant relief program known as the "on-ramp" program. A previous temporary initiative of the Biden administration created a grace period following the pandemic, with eligible borrowers able to claim forbearance on their loans without accruing interest. That initiative ended last fall, but the administration wanted to make sure borrowers had the time they needed to get caught up on starting to make payments and provide some protections against the severe consequences of missed or late payments.

With the 'on-ramp' program set to expire on September 30th, it's crucial for borrowers to understand the potential implications. Failure to make payments could lead to late fees, penalties, and even negative credit reporting. The separate 'Fresh Start' program, which provided a pathway for defaulted borrowers to return to good standing, will also end this month.

The administration, anticipating these closing program windows, has attempted to mitigate some of the hardship by offering new student loan relief initiatives, such as the IDR program and the SAVE plan. Both programs have been challenged in the court system and are temporarily halted as litigation continues. These legal challenges actually created quite a mess, with millions of borrowers being forced into forbearance. And the administration's plans for broad student loan forgiveness are looking less likely than ever.

Nearly all House Republicans voted to block student debt relief as part of their bill last month to raise the debt ceiling.Photo byJemal Countess/Getty Images

Given the ongoing legal issues and resulting complications for borrowers, many are now advocating for the administration to take action. Calling for an extension of the temporary 'on-ramp' program or a pause in student loan payments. The Debt Collective, a union of debt holders that advocates for student loan borrowers, has released a statement echoing this sentiment.

"Sending tens of millions of working families a massive bill while the student loan system is in absolute shambles is simply bad federal policy, and doing it a month before the election is even worse politics… Not pausing student loans means borrowers wronged by the federal government must figuratively and literally pay the price."

Currently, the Biden administration has given no indication that it plans to extend either of the relief programs. This means borrowers must start making on-time monthly payments to avoid late fees and adverse credit reporting. However, many are concerned about the potential impacts, with at least 10 million borrowers behind on their repayments as of January of last year.