The interest on federal student loans has started accruing again.
Since March 2020, the interest rate on most government-owned education debt was set to zero, and people faced no penalties for not making payments.
Now borrowers will see their loans return to their pre-Covid pandemic rates, typically between 3% and 7%. The interest rates on federal student loans are fixed once disbursed, but vary depending on when they’re taken out.
Borrowers’ first loan payments are due in October.
“Millions of federal student loan borrowers are starting to adjust to the reality of having to figure out how to bake their student loan payments into their budget once again,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
The typical monthly student loan bill is around $350.
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Nearly all people eligible for the pause on bills have taken advantage of it, with less than 1% of qualifying borrowers continuing to make payments on their education debt, according to an analysis by higher education expert Mark Kantrowitz.
As a result of the policy, the average borrower likely saved around $15,000 in student loan payments during the pause, including around $5,000 in interest charges.
Some people will continue to benefit from a break on interest, including those with unsubsidized undergraduate loans who are in an in-school deferment or grace period. Borrowers facing unemployment or other economic hardship can also apply for deferments that may keep their interest on hold.