Ibrahim Gardner
The COVID-19 pandemic saw the US federal government pause payments on most federal student loans. This payment pause, which ended on September 1, 2023, was extended multiple times by President Trump and President Biden. While the pause was in effect, interest was not charged on covered loans, and no collection activities should have occurred on loans in default. However, the pause did not apply to private student loans or borrowers with commercially-held Federal Family Education Loans (FFEL) that were not in default and school-held Perkins Loans. Now that the payment pause has ended, borrowers with federal student loans will receive their first bills in September 2023, with payments due starting in October.
| Characteristics | Values |
|---|---|
| Payment pause start date | N/A |
| Payment pause end date | September 1, 2023 |
| Interest rate during payment pause | 0% |
| Loans covered by the payment pause | Federal student loans held by the Department of Education |
| Loans not covered by the payment pause | Private student loans, commercially-held FFEL loans not in default, school-held Perkins loans |
| Options for loans not covered by the payment pause | Consolidate into a Direct Loan program to be eligible for the payment suspension and interest pause |
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What You'll Learn
The CARES Act and COVID-19 payment pause
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, by President Donald Trump. The Act provided trillions of dollars toward various temporary relief programs during the COVID-19 pandemic. One of the most well-known aspects of the CARES Act was the distribution of stimulus payments to eligible individuals and families. These direct payments provided financial relief to millions of lower- and middle-income Americans.
The CARES Act also provided a pause on student loan debt. The Act placed a temporary pause on student loan payments and set the interest rate at 0% for all federally held student loans until November 2020. On August 8, 2020, Trump directed the Secretary of Education to continue the suspension of loan payments, stop collections, and waive interests on student loans held by the Department of Education until December 31, 2020. The federal student loan payment pause was extended multiple times by President Trump and President Biden. The payment pause ended on September 1, 2023, meaning that student loan interest resumed, and borrowers received their first bills in over three years in September, with payments due starting in October 2023.
During the payment suspension, no collection activities should have occurred on loans in default that were covered by the payment pause. This means there should have been no collection calls, no wage garnishment, and no money taken from tax refunds or Social Security benefits to collect on defaulted loans. The months spent in the payment pause counted toward IDR and PSLF forgiveness. However, borrowers had to take steps to ensure they were otherwise eligible for IDR and PSLF Forgiveness.
Even though the payment pause has ended, there are still benefits to consolidating loans, such as a better IDR plan.
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The Biden Administration's SAVE Plan
During the COVID-19 pandemic, federal student loan borrowers in the US were granted a pause on their payments. This pause ended in May 2022, and borrowers are now expected to make their regular payments. However, the US Department of Education has stated that it will continue to offer flexible repayment options for borrowers who need assistance.
The Biden Administration's Saving on a Valuable Education (SAVE) Plan was announced in 2024 as an effort to provide relief to federal student loan borrowers. The plan offered a zero percent interest rate and no monthly payments, allowing borrowers to pause their loan repayments. However, the SAVE Plan has been deemed unlawful by federal courts, and the Department of Education has taken steps to bring fiscal responsibility to the federal student loan portfolio. As a result, interest accrual for borrowers with loans in the SAVE Plan resumed on August 1, 2025.
The SAVE Plan has been controversial, with critics arguing that the Biden Administration used "loan forgiveness" promises to win votes. As a result of the federal court injunction, borrowers in the SAVE Plan are encouraged to transition to a legally compliant repayment plan, such as the Income-Based Repayment Plan (IBR). The Income-Based Repayment Plan calculates payments based on a borrower's income, offering loan forgiveness after 20 or 25 years.
Borrowers in the SAVE Plan have until July 2028 to switch to an alternative repayment plan or they will be automatically moved to the Repayment Assistance Plan (RAP). It is recommended that borrowers review their options and calculate the most optimal strategy for repaying their loans. The Federal Student Aid website and the Loan Simulator tool can help borrowers compare available repayment plans and determine the best option for their financial goals.
While the SAVE Plan provided temporary relief for federal student loan borrowers, it is important for individuals to understand their repayment options and make informed decisions to align with their financial goals.
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Interest accrual and repayment plans
The Biden Administration's Saving on a Valuable Education (SAVE) Plan, which began in August 2023, allowed for a 42-month pandemic-related pause on student loan payments. However, the plan was blocked by the courts in 2024 and has been in legal limbo since, with interest set to start accruing again under court order from August 1, 2025. The SAVE Plan has been deemed illegal by the Trump Administration, which has criticized it as overly generous and fiscally irresponsible.
The Education Department is now rolling out two new repayment plans as part of a broader overhaul under President Donald Trump's One Big Beautiful Bill Act. These plans aim to simplify the student loan system and curb costs to taxpayers. The two new plans are:
- A revised 10-year standard repayment program where fixed payments are made over a term based on the loan amount. The larger the loan, the longer the term, typically ranging from 10 years for loans under $25,000 to 25 years for loans exceeding $100,000.
- The Repayment Assistance Program (RAP), which is philosophically similar to existing income-driven repayment (IDR) plans. RAP ties payments to a simplified income formula, with payments ranging from 1% to 10% of the borrower's adjusted gross income over a term of up to 30 years. Any remaining debt is forgiven at the end of the term.
Borrowers who were previously enrolled in the SAVE Plan will need to switch to one of these new repayment plans to start making qualifying payments. It is recommended that borrowers use the Loan Simulator to estimate monthly payments, determine repayment eligibility, and identify the best repayment plan for their goals.
It is important to note that prepayment of student loans is generally allowed without penalty, and prepayment may substantially reduce the amount of interest paid over time. Additionally, borrowers facing difficulties in repaying their loans are advised to contact their loan holders to explore options such as changing their repayment plan, deferment, or forbearance.
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Loan forgiveness and PSLF
The COVID-19 pandemic saw the US Department of Education pause federal student loan payments in March 2020, offering borrowers relief during the pandemic. While payments resumed in 2023, the Biden administration provided a year-long grace period that ended in October.
The Public Service Loan Forgiveness (PSLF) Program offers to cancel any remaining student debt after borrowers make 120 qualifying monthly payments (approximately 10 years) under a qualifying repayment plan while working full-time for an eligible public employer. Volunteer service with the Peace Corps is considered qualifying employment for the PSLF program.
The PSLF Buyback Program allows borrowers to have their months in the SAVE Plan forbearance counted toward loan forgiveness. However, this requires additional steps, such as submitting an updated Employment Certification Form (ECF) to prove eligible employment.
The Repayment Assistance Program (RAP) is another option, which ties payments to a simplified income formula. Under RAP, payments range from 1% to 10% of the borrower's adjusted gross income over a term of up to 30 years, after which any remaining debt will be forgiven.
Additionally, there are volunteer programs that offer student loan forgiveness or cancellation in exchange for volunteer service. For example, Shared Harvest Fund's Student Loan Debt Relief (SLDR) program provides loan repayment support to skilled volunteers and frontline care workers.
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Wage garnishment and defaulted loans
The Trump Administration has announced that it will start collecting on defaulted federal student loans, impacting millions of borrowers. This includes the resumption of wage garnishment, which will see up to 15% of paychecks withheld for those in default. The Treasury Offset Program, a federal program, will administer the collections by intercepting payments such as tax refunds and Social Security benefits.
The Department of Education has stated that it will begin a "robust communication strategy" to inform defaulted borrowers about the Treasury Offset Program and encourage them to explore repayment options. These options include enrolling in income-driven repayment programs or participating in loan rehabilitation, which requires consecutive, timely loan payments to get out of default.
Borrowers in the SAVE Plan, which offered lower monthly payments, will see their loan balances grow as interest starts accruing. While payments are currently on hold, they will be responsible for monthly payments, including accrued interest and principal amounts once the forbearance ends.
The recent developments in student loan collections highlight the urgent need for employers to offer benefits that alleviate the financial burden on employees with student loans. Strategies such as matching student loan contributions to retirement plans, offering paid time off (PTO) exchanges, and providing financial planning counseling can significantly improve employees' financial wellbeing.
It is important for borrowers to understand their repayment options and prepare for potential increases in student loan payments. They can use tools like the Federal Student Aid's Loan Simulator to estimate monthly payments and explore different repayment plans.
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Frequently asked questions
During the COVID pandemic, there was a 42-month pause on student loan payments, ending in August 2023. Since then, the Biden administration has introduced the SAVE plan, which does not require monthly payments. However, this plan has been blocked by the courts and is currently in legal limbo. Therefore, it is unclear whether individuals enrolled in the SAVE plan are required to make payments at this time.
The Saving on a Valuable Education SAVE plan is an income-based repayment proposal introduced by former President Biden in 2023. The plan aimed to make student loan repayment more affordable by capping payments at 5% of discretionary income for undergraduates and 10% for graduate loans.
As of July 2025, there are two new repayment plans: a revised 10-year standard repayment plan and a new Repayment Assistance Plan (RAP). The standard repayment plan sets fixed monthly payments based on the size of the loan balance, with larger balances given longer repayment periods. The RAP plan ties payments to a simplified income formula, with payments ranging from 1% to 10% of the borrower's adjusted gross income over a term of up to 30 years.
