The government Student Loan On-Ramp program is ending on September 30th. This was part of the COVID National Forbearance and the Student Loan Repayment Restart. It allowed borrowers to not make payments for up to 12 months, and non-payment would not be reported to credit bureaus.
Starting on October 1, the repayment process will return to its normal processing rules. Non-payment delinquencies and forbearances will be reported to the credit bureaus.
On-ramp had several benefits for the borrowers enrolled.
- Student Loans did not fall into delinquency or default
- Missed payments did not drop credit scores
- Debt Collectors were not contacted for missed payments
There was no formal enrollment process. It was done automatically if no payment was made. This program end received little to no press coverage, but the consequences are severe for student loan borrowers who have been enrolled.
Federal Loan Non-Payment Rules
Under the normal non-payment rules, federal loan borrowers are tagged as delinquent after 30 days of non-payment. Once the non-payment reaches 90 days, your nonpayment will be reported to the credit bureaus. In most cases, federal loans are classified as default after 270 days of non-payment.
Under the On-Ramp program, the federal government did not report the non-payment, it was classified as a forbearance period. On October 1, 2024, a borrower’s clock will start at zero regarding non-payment in the federal system.
Consequences of Federal Loan Non-Payment
The consequences of being delinquent or defaulting are severe if a borrower enters these non-payment stages after being enrolled in the On-Ramp program. It is unclear how the credit bureaus will react. Some may take the stand that participating in the On-Ramp program forbearance and then being delinquent will include both periods as non-payment. This would impact your credit score even more severely.
Your credit score is critical for people to finance large purchases like a home or auto. It is recommended that you avoid this if possible.
In addition to the credit score impact, a federal loan in default allows the federal government to garnish wages, tax refunds, and social security, to name a few.
Steps to Determine Where You Are
If you are unclear about where to start, here are some ideas that may help you.
- Log into StudentAid.gov using your FSA ID and Password
- Confirm loan Servicer and contact loan servicer
- Confirm your loan balance, monthly payment, and Payment Due Date
- Verify repayment method
Limited Repayment Options Due to SAVE Halt
Due to the current SAVE lawsuits, borrowers cannot enroll in the various Income-Driven Repayment (IDR) methods. These methods could provide some borrowers with a much lower monthly payment.
At this time, to stay current, borrowers will need to select from one of the four traditional methods. These methods are the 10-year Standard, Standard Extended, 10-year Graduate, and the Graduated Extended. Once the IDR methods become available, you can switch to one of those options.
If you were enrolled in an IDR method before the COVID-19 National Forbearance and made no changes, you are likely still enrolled in that IDR plan. You can still make payments under that IDR plan. If you switched or were converted to SAVE, then payments are not required at this time until the lawsuit is resolved or the Department of Ed decides.
Student Loan On-Ramp Program Is Ending Summary
With the On-Ramp ending, we suggest you contact the loan servicer to clarify your due date and current payment amount. The loan servicer can also review what loan repayment method you can enroll in to stay current. You want to avoid a missed or late payment.
Beginning payments may be challenging for some borrowers leaving this program, but there may be a few options to make the payment more affordable. Forbearance could be an option, but that may impact your credit score and your ability to borrow in the future.
If you need help in determining your best option, contact PayForEd or one of our trained professionals. With the new IRS integration, the loan servicers are limited in the advice that they can provide, which may not be the best answer for your situation.
