The “On-Ramp” to Student Loan Repayment

In March 2020, the federal government hit pause on federal student loan repayments. The loan payment pause was part of a wider package of relief efforts designed to support Americans who were impacted by the unprecedented effects of the COVID-19 pandemic—but as of September 2023, federal student loan payments are back.

For many borrowers, the return of monthly loan payments is not exactly great news. The silver lining is that there are a number of new actions from the federal government designed to reduce the financial burden for student loan borrowers. One such action which may affect you and your budget for the upcoming year is the new “on-ramp” to repayment period.

What Is the On-Ramp?

The on-ramp period offers some relief to borrowers who, after the restart of student loan repayments in fall 2023, will struggle to pay back their student loans. Lasting for one year (from October 1, 2023 until September 30, 2024), the on-ramp period will shield borrowers from the severest consequences of not making payments, or making payments late.

How Will Borrowers Be Affected?

Borrowers who are able to make their monthly student loan payments won’t be affected by the on-ramp period, and the federal government recommends that wherever possible, borrowers make their full monthly payments as required.

However, borrowers who can’t keep up with their student loan payments—due to job loss, low income or other financial obligations, for example—will be treated differently than is the normal procedure for failing to make monthly payments in full or on time. During the twelve months of the on-ramp period, borrowers who miss payments won’t be reported to credit bureaus, put into default, or see their loans sent to collection agencies.

Borrowers don’t need to apply or do anything special to qualify for the on-ramp period. It will be automatically applied to borrowers who miss payments or are late with payments over these twelve months.

Why Create the On-Ramp?

The on-ramp was created as a stop-gap measure to support financially vulnerable borrowers, after the Biden administration’s student debt relief plan was shut down by the Supreme Court. Seeking alternative ways to support student loan borrowers, the federal government has announced a series of other actions designed to provide borrowers with at least some financial relief. The on-ramp period is one such measure, along with the SAVE Plan which cuts monthly payments for all borrowers by at least $1,000 per year.

What Are the Risks?

Borrowers who plan to miss monthly payments during the on-ramp period should be aware that interest is still accruing during the twelve-month grace period. In addition, missed payments won’t count toward loan forgiveness, so borrowers who don’t make payments during this time could be putting themselves behind schedule for possible forgiveness of debts in the future and increasing their loan debt due to the accrued interest rate.

Once the on-ramp period is finished, borrowers who miss monthly payments will once again be considered delinquent and see a resulting impact on their credit score. It is therefore essential that student loan borrowers who plan to miss payments during the on-ramp period develop a plan as soon as possible for getting back on track with loan repayments.

Not sure where to start? Contact your loan servicer to learn what options may be available. If your income is under $32,800 (or $67,500 for a family of four), you likely qualify for the federal government’s new SAVE Plan, which can reduce your monthly payments or possibly eliminate them for as long as your earnings stay under 225% of the federal poverty level.

HUECU members may contact GreenPath Financial Wellness for free federal student loan counseling at huecu.org/GreenPath.