As the 12-month grace period for student loan borrowers came to an end on September 30, the consequences for those struggling to make payments are becoming more apparent. With around 43 million Americans holding student loan debt totaling $1.5 trillion, the options for borrowers are narrowing.
The SAVE plan, a new income-driven repayment plan aimed at providing affordable monthly payments, is currently on hold due to legal challenges. This, combined with the expiration of the on-ramp period and the Fresh Start program, leaves borrowers with limited alternatives.
Defaulting on student loans can have serious repercussions, including damage to credit scores and eligibility for additional aid. Options like deferment or forbearance can provide temporary relief, but interest continues to accrue.
Key Points:
- The on-ramp period aimed to ease the transition for borrowers after a three-year payment pause during the pandemic.
- Missed payments during the grace period did not lead to default but could impact repayment in the long run.
- Income-driven repayment plans and programs like Public Service Loan Forgiveness can offer relief for struggling borrowers.
Understanding the implications of defaulting on student loans and exploring available repayment options is crucial for borrowers facing financial challenges.