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The 12-month grace period for student loan borrowers ended on Sept. 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 miss payments, you still be falling behind ultimately on repaying your loans,” said Abby Shaforth, director of the 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 misses 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 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 9 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. However 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 made 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 Oct. 15.
What happened with the Fresh Start program?
The Fresh Start program, which gave benefits to borrowers who were delinquent before the pandemic payment pause, also closed on Sept. 30. During this limited program, student loan borrowers who were in default before the pandemic were allowed to remove their loans from default, allowing them to enroll in income-driven payment plans, or apply for deferment, among other benefits.
The start of October typically signifies the beginning of the college financial aid application process. But now — for the second year in a row — that’s not the case.
The FAFSA, or Free Application for Federal Student Aid, will instead formally launch by Dec. 1 to allow the U.S. Education Department to run a testing period before it opens the form to the wider public. Millions of students have to fill out the FAFSA each year to access college grants and loans, and the so-called “phased rollout” is intended to give officials time to identify and work through issues — all in the hopes of avoiding a repeat of last year’s fiasco.
Last week, U.S. Education Secretary Miguel Cardona assured college leaders in a letter that the department had “all hands on deck” to meet its new timeline this year, saying the government is working to release the 2025-26 form following software-industry best practices.
When will the 2025-26 FAFSA come out?
The phased rollout, which includes four beta testing periods, began Tuesday. The first testing group is relatively small, with just hundreds of students tapped to fill out the form. The Education Department selected six college-access community-based organizations that recruited students to fill out the form at in-person completion events.
“Through October and November, we will expand our testing to include tens of thousands of students and many different types of high schools and postsecondary institutions,” Jeremy Singer, the newly appointed FAFSA executive advisor, said in a news release announcing details of the rollout.
The FAFSA will then open to all students “on or before Dec. 1,” the department has said. (The FAFSA typically comes out in the fall ahead of the academic year the form applies to. So the 2024-25 application was released last year, and the 2025-26 application is the primary focus now.)
Higher education groups and financial aid officers so far have had mostly positive responses to the new timeline and testing period for the 2025-26 application, saying that releasing a fully functional form later in the year would be better for students than opening the FAFSA on Oct. 1 and having to deal with months of problems.
“While we wish we could have an earlier FAFSA open date, we support end-to-end testing to ensure the product released on December 1 works for students, families, and schools,” Beth Maglione, interim president and CEO of the National Association of Student Financial Aid Administrators, said in August.
What happened with last year’s FAFSA rollout?
Last year’s form, dubbed “Better FAFSA”, marked the most significant update to the financial aid form in decades. But the release was marred by delays and repeated technical problems that, in the best-case scenarios, caused headaches for families and, in the worst cases, discouraged some students from attending college at all.
All the issues with the 2024-25 application cycle were in the spotlight again last week, when the Government Accountability Office released a scathing report about the rollout and presented it during a congressional hearing.
The Education Department rushed through testing the form last year, leading the department to identify more than 40 separate technical issues after the FAFSA was released publicly, according to the government watchdog. Some issues still hadn’t been fully resolved as of early September 2024, the GAO found, including barriers that continue to complicate the process for students who have a parent or spouse without a Social Security number.
When students tried to get help from the Education Department, they were often unsuccessful. Some 4 million calls, or 74%, were not answered due to understaffing at the call center. And when calls were answered, students often weren’t given clear information about when the FAFSA issues would be resolved, the GAO found.
For its part, the Education Department put out a white paper one day before the GAO report outlining all the ways it has improved the process for this year’s FAFSA release. That includes a clearer timeline, testing periods to ensure the form functions properly when released, improved online resources to help students and parents while they’re filling out the form, and 700 new call center agents to handle call volume.
Given that one of the most common complaints from colleges and families alike last year was poor communication — a problem the GAO also highlighted in its report — the department has also repeatedly stressed it will provide more transparency and clearer communication this year. The department has already started posting updates to a public dashboard, where this week it will begin sharing progress reports from the beta testing.
How to prepare for the 2025-26 FAFSA
Because the four beta testing periods are run through schools and college access groups, individual students and parents cannot sign up to access the form early.
And that’s OK — Shannon Vasconcelos, who works with families filling out the form through her role as senior director of college finance at Bright Horizons College Coach, told Money in August that she’d recommend waiting for the government to identify and resolve major issues first.
“I would let the department work out the kinks in the form before I was anxious to hop on there,” she says. “Colleges are not going to set any financial aid deadlines so early that you couldn’t complete it on the normal timeline.”
Students applying in the early-decision admissions rounds will likely see the most disruption to a typical schedule since they would normally have financial aid submission deadlines in the fall. Regular-decision applicants shouldn’t see too many deadline changes, assuming the form is fully functional in early December, Vasconcelos said.
Still, because things are in flux, everyone applying to college this year should pay close attention to the financial aid deadlines of individual colleges. Some may have shifted their calendars to account for the new FAFSA timeline.
In the meantime, you can also check whether colleges have any processes for accessing early award estimates; many built those last year after the repeated FAFSA delays. If not, all colleges are required to have a net price calculator that can give you an estimate of your expected price before you fill out the FAFSA.
Finally, students applying to a subset of more than 200 mostly selective colleges have to fill out a second financial aid application called the CSS Profile. That still opened like usual on Tuesday. While the two forms require some of the same information, the CSS Profile is far more in-depth, and students shouldn’t feel they have to wait for the FAFSA to get started on the profile.