What You Need to Know About the Student Loan "On-Ramp"

The COVID-19 pandemic affected every aspect of our lives, including student loans. But many borrowers were able to take advantage of the pandemic-related payment pause, which lasted for more than three years. But now, as of October 2021, student loan payments are due again. So, what happens if you can't make your payments? The Biden administration has created an "on-ramp period" that will allow borrowers to skip payments without facing any financial consequences. In this blog post, we'll cover everything you need to know about this new period, so you can make informed decisions about your student loan debt.

First off, what is the "on-ramp period"? Essentially, it's a year-long extension of the pandemic-related payment pause that ended in September 2021. The new period will last until September 30, 2024. During this time, borrowers who are unable to make their payments won't be reported as being in default to the national credit rating agencies. This means that your credit score won't be negatively impacted if you need to skip a payment or two.

Who is eligible for the on-ramp period? If you were eligible for the pandemic-related payment pause that took effect in March 2020, you are automatically eligible for the on-ramp period. This includes borrowers with federal Direct Loans, Federal Family Education Loans, and Perkins Loans held by the Department of Education. You don't need to apply for the benefit - it will be automatically applied to eligible borrowers.

It's important to note that even though you won't be penalized for missing payments during the on-ramp period, interest will still accrue on your loans. This means that if you miss a payment, or make a partial payment, you could end up owing more debt over time due to interest. In addition, your loan servicer may increase your monthly payment amounts to ensure that your debt is paid off on time.

Another major difference between the on-ramp period and the pandemic-related payment pause is that missing a payment now means that you'll miss out on a month's worth of credit toward student loan forgiveness under certain repayment plans. So, if you're planning on using a repayment plan that features loan forgiveness, you may want to consider making your payments on-time, if possible.

The student loan on-ramp period is designed to help borrowers transition back to making student loan payments part of their budget. If you are eligible for the on-ramp period, you'll have a year to skip payments without facing any financial consequences. However, it's important to remember that interest will still accrue on your loans, and missing payments could result in an increase in monthly payments or a delay in loan forgiveness. As with anything related to student loans, it's a good idea to do your research and consult with a financial advisor before making any decisions about your debt. By staying informed, you can make the best choices for your financial future.