Student Union
Grace period for US student loan payments is over. Here's what you need to know
The 12-month grace period for student loan borrowers ended on September 30. The "on-ramp" period helped borrowers who are struggling to make payments avoid the risk of defaulting and hurting their credit score.
"The end of the on-ramp period means the beginning of the potentially harsh consequences for student loan borrowers who are not able to make payments," said Persis Yu, Deputy Executive Director at the Student Borrower Protection Center.
Around 43 million Americans have student loan debt, amounting to $1.5 trillion. Around eight million of those borrowers had enrolled in the SAVE plan, the newest income-driven repayment plan that extended the eligibility for borrowers to have affordable monthly student loan payments. However, this plan is currently on hold due to legal challenges.
With the on-ramp period and a separate program known as Fresh Start ending and the SAVE plan on hold, student loan borrowers who are struggling to afford their monthly payments have fewer options, added Yu. Student loan borrowers who haven't been able to afford their monthly payments must consider their options to avoid going into default.
If you have student loans, here's what you need to know.
What was the on-ramp period?
The Education Department implemented this grace period to ease the borrower's transition to make payments after a three-year payment pause during the COVID-19 pandemic. During this year-long period, borrowers were encouraged to keep making payments since interest continued to accumulate.
"Normally, loans will default if you fall about nine months behind on making payments, but during this on-ramp period, missed payments would not move people towards defaulting and then being subject to forced collections. However, if you missed payments, you still be falling behind ultimately on repaying your loans," said Abby Shaforth, director of National Consumer Law Center's Student Loan Borrower Assistance Project.
Since this grace period has ended, student loan borrowers who don't make payments will go delinquent or, if their loans are not paid for nine months, go into default.
Borrowers who cannot afford to make payments can apply for deferment or forbearance, which pause payments, though interest continues to accrue.
What happens if I don't make my payments?
Borrowers who can't or don't pay risk delinquency and eventually default. That can badly hurt your credit rating and make you ineligible for additional aid and government benefits.
If a borrower missed one month's payment, they will start receiving email notifications, said Shaforth. Once the loan hasn't been paid for three months, loan servicers notify to the credit reporting agencies that the loan is delinquent, affecting your credit history. Once the borrower hasn't paid the loan for nine months, the loan goes into default.
If you're struggling to pay, advisers first encourage you to check if you qualify for an income-driven repayment plan, which determines your payments by looking at your expenses. You can see whether you qualify by visiting the Federal Student Aid website. If you've worked for a government agency or a non-profit organization, you could also be eligible for the Public Service Loan Forgiveness Program, which forgives student debt after 10 years.
What happens when a loan goes into default?
When you fall behind on a loan by 270 days — roughly nine months — the loan appears on your credit report as being in default.
Once a loan is in default, it goes into collections. This means the government can garnish wages (without a court order) to go towards paying back the loan, intercept tax refunds, and seize portions of Social Security checks and other benefit payments.
What if I can't pay?
If your budget doesn't allow you to resume payments, it's important to know how to navigate the possibility of default and delinquency on a student loan. Both can hurt your credit rating, which would make you ineligible for additional aid.
If you're in a short-term financial bind, you may qualify for deferment or forbearance — allowing you to temporarily suspend payment.
To determine whether deferment or forbearance are good options for you, you can contact your loan servicer. One thing to note: interest still accrues during deferment or forbearance. Both can also impact potential loan forgiveness options. Depending on the conditions of your deferment or forbearance, it may make sense to continue paying the interest during the payment suspension.
What is an income-driven repayment plan?
The U.S. Education Department offers several plans for repaying federal student loans. Under the standard plan, borrowers are charged a fixed monthly amount that ensures all their debt will be repaid after 10 years. But if borrowers have difficulty paying that amount, they can enroll in one of several plans that offer lower monthly payments based on income and family size. Those are known as income-driven repayment plans.
Income-driven options have been offered for years and generally cap monthly payments at 10% of a borrower's discretionary income. If a borrower's earnings are low enough, their bill is reduced to $0. And after 20 or 25 years, any remaining debt gets erased.
What is the latest with the SAVE program?
In August, the Supreme Court kept on hold the SAVE plan, the income-driven repayment plan that would have lowered payments for millions of borrowers, while lawsuits make their way through lower courts.
Eight million borrowers who had already enrolled in the SAVE plan don't have to pay their monthly student loan bills until the court case is resolved. Debt that already had been forgiven under the plan was unaffected.
The next court hearing about this case will be held on October 15.
What happened with the Fresh Start program?
The Fresh Start program, which gave benefits to borrowers who were delinquent prior to the pandemic payment pause, also closed on September 30. During this limited program, student loan borrowers who were in default prior to the pandemic were given the opportunity to remove their loans from default, allowing them to enroll in income-driven payment plans, or apply for deferment, among other benefits.
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Lily Meskers faced an unexpected choice in the lead-up to the first major election she can vote in.
The 19-year-old University of Montana sprinter was among college athletes in the state who received an inquiry from Montana Together asking if she was interested in a name, image and likeness deal to support Sen. Jon Tester, a three-term Democrat seeking re-election. The group, which is not affiliated with the Tester campaign, offered from $400 to $2,400 to athletes willing to produce video endorsements.
Meskers, who is from Colorado but registered to vote in Montana, decided against the deal because she disagrees with Tester's votes on legislation involving transgender athletes in sports.
"I was like, OK, I believe that this is a political move to try to gain back some voters that he might have lost," Meskers said. "And me being a female student-athlete myself, I was not going to give my endorsement to someone who I felt didn't have the same support for me."
Professional athletes such as LeBron James, Colin Kaepernick and Stephen Curry have taken high-profile stances on hot-button topics and political campaigns in recent years, but college athletes are far less outspoken — even if money is available, according to experts in the NIL field. Being outwardly political can reflect on their school or endanger potential endorsement deals from brands that don't want controversy. It can certainly establish a public image for an athlete — for better or for worse — or lead to tensions with teammates and coaches who might not feel the same way.
There are examples of political activism by college athletes: A Texas Tech kicker revealed his support for former President Donald Trump on a shirt under his uniform at a game last week and a handful of Nebraska athletes a few days ago teamed up in a campaign ad against an abortion measure on the Tuesday's ballot.
Still, such steps are considered rare.
"It can be viewed as risky and there may be people telling them just don't even take that chance because they haven't made it yet," said Lauren Walsh, who started a sports branding agency 15 years ago. She said there is often too much to lose for themselves, their handlers and in some cases, their families.
"And these individuals still have to figure out what they're going to do with the rest of their lives, even those that do end up getting drafted," she added.
College coaches are not always as reticent. Auburn men's basketball coach Bruce Pearl has used social media to make it clear he does not support Kamala Harris, Trump's Democratic opponent in next week's presidential election. Oklahoma State football coach Mike Gundy once caused a stir with a star player for wearing a shirt promoting a far-right news outlet.
Blake Lawrence, co-founder of the NIL platform Opendorse, noted that this is the first presidential election in the NIL era, which began in July 2021. He said athletes are flocking to opportunities to help increase voter turnout in the 18-to-24 age demographic, adding that one of his company's partners has had 86 athletes post social media messages encouraging turnout through the first half of the week.
He said athletes are shying away from endorsing specific candidates or causes that are considered partisan.
"Student-athletes are, for the most part, still developing their confidence in endorsing any type of product or service," he said. "So if they are hesitant to put their weight behind supporting a local restaurant or an e-commerce product, then they are certainly going to be hesitant to use their social channels in a political way."
Giving athletes a voice
Many college athletes have opted to focus on drumming up turnout in a non-partisan manner or simply using their platforms to take stands that are not directly political in nature. Some of those efforts can be found in battleground states.
A progressive group called NextGen America said it had signed players in Arizona, Michigan, Nevada, New Hampshire, Pennsylvania and Virginia to encourage voting among young people. Another organization, The Team, said it prepped 27 college athletes in Pennsylvania, North Carolina, Arizona and Michigan to lead volunteer voter participation opportunities for students. The organization also said it got more than 625 coaches to sign a nonpartisan pledge to get their athletes registered to vote.
The Team's executive director is Joe Kennedy, a former coach who coordinated championship visits and other sporting events at the White House during President Barack Obama's administration. In early October, it hosted a Zoom event during which panelists such as NCAA President Charlie Baker and WNBA players Nneka Ogwumike and Natasha Cloud gave college athletes advice about using their platforms on campus.
In its early days, The Team seized upon momentum from the record turnout seen in the 2020 election. The NCAA that year said Division I athletes could have Election Day off from practice and play to vote. Lisa Kay Solomon, founder of the All Vote No Play campaign, said even if the athletes don't immediately take stands on controversial issues, it's important for them to learn how.
"It is a lot to ask our young people to feel capable and confident on skills they've never had a chance to practice," Solomon said. "We have to model what it means to practice taking risks, practice standing up for yourself, practice pausing to think about what are the values that you care about — not what social media is feeding into your brain, but what do you care about and how do you express that? And how do you do it in a way that honors the kind of future that you want to be a part of?"
Shut up and play?
Two years ago, Tennessee-Martin quarterback Dresser Winn said he would support a candidate in a local district attorney general race in what experts said was very likely the first political NIL deal by a college athlete.
There have been very few since.
The public criticism and fallout for athletes who speak out on politics or social issue can be sharp. Kaepernick, the Super Bowl-winning quarterback of the San Francisco 49ers, hasn't played in an NFL game since January 2017, not long after he began kneeling during the national anthem at games.
Meskers, the Montana sprinter, said political endorsements through NIL deals could create problems for athletes and their schools.
"I just think that NIL is going to run into a lot of trouble and a lot of struggles if they continue to let athletes do political endorsements," she said. "I just think it's messy. But I stand by NIL as a whole. I think it's really hard as a student athlete to create a financial income and support yourself."
Walsh said it's easier for wealthy and veteran stars like James and Ogwumike to take stands. James, the Los Angeles Lakers star, started More Than a Vote — an organization with a mission to "educate, energize and protect Black voters" — in 2020. He has passed the leadership to Ogwumike, who just finished her 13th year in the WNBA and also is the president of the Women's National Basketball Players Association. More than a Vote is focused on women's rights and reproductive freedom this year.
"They have very established brands," Walsh said. "They know who they are and they know what their political stance is. They know that they have a really strong following that -- there's always going to be haters, but they're also always going to have that strong following of people who listen to everything that they have to say."
Andra Gillespie, an associate professor at Emory University who teaches African American politics, also said it is rare that a college athlete would make a significant impact with a political stand simply because they tend to have a more regional platform than national. Even celebrities like Taylor Swift and Eminem are better at increasing turnout than championing candidates.
"They are certainly very beneficial in helping to drive up turnout among their fans," Gillespie said. "The data is less conclusive about whether or not they're persuasive – are they the ones who are going to persuade you to vote for a particular candidate?"
Athletes as influencers
Still, campaigns know young voters are critical this election cycle, and athletes offer an effective and familiar voice to reach them.
Political and social topics are not often broached, but this week six Nebraska athletes — five softball players and a volleyball player — appeared in an ad paid for by the group Protect Women and Children involving two initiatives about abortion laws on Tuesday's ballot.
The female athletes backed Initiative 434, which would amend the state constitution to prohibit abortions after the first trimester, with exceptions. Star softball player Jordy Bahl said on social media that the athletes were not paid.
A University of Montana spokesperson said two athletes initially agreed to take part in the NIL deal backing Tester. The school said one withdrew and the other declined to be interviewed.
For Meskers, deciding against the offer boiled down to Tester twice voting against proposals to bar federal funds from going to schools that allow transgender athletes to play women's sports, a prominent GOP campaign topic. Tester's campaign said the proposals were amendments to government spending packages, and he didn't want to play a role in derailing them as government shutdowns loomed.
"As a former public school teacher and school board member, Jon Tester believes these decisions should be made at the local level," a Tester spokesperson said. "He has never voted to allow men to compete against women."
Meskers said she believes using influence as college athletes is good and she is in favor of NIL. She just doesn't think the two should mix specifically for supporting candidates.
"I think especially as student athletes, we do have such a big voice and we do have a platform to use," she said. "So I think if you're encouraging people to do their civic duties and get up and go (vote), I think that's a great thing."
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