After a pause of more than three years, millions of federal student loan borrowers are preparing to begin making payments again.

Former President Donald Trump initiated the student loan pause near the start of the Covid-19 pandemic in March 2020, and it has been extended several times since then. President Joe Biden proposed offering up to $20,000 in loan forgiveness to borrowers, but that program was struck down this June by the Supreme Court. Earlier this year, the U.S. Department of Education announced the pause would come to an end by fall 2023.

According to Federal Student Aid, more than 43 million people nationwide owe a collective $1.6 trillion. As of 2019, nearly one in five student loan borrowers were behind on payments. On average, at about $300 a month (undergraduate school debt), student loan payments rank just below car payments for many households.

The return of student loan payments is likely to have a significant financial impact. In a July U.S. News survey of federal student loan borrowers, nearly half said they aren’t financially prepared to resume payments.

As your clients prepare for the return to student loan payments — and the impact on their monthly budgets — here are a few things to keep in mind that can help make a smoother transition.

1 | Payments resume in October, and interest begins accruing in September

There are several key dates that borrowers should keep in mind. As of September 1, interest, which was set at zero during the pause, will begin accruing at their current fixed rates. First debt repayments will begin in October. As those dates approach, borrowers should make sure that auto-debit payments are ready to restart, so they don’t miss any payments.

2 | Loan servicers may have changed during the break period

During the pause in payments, several student loan servicers consolidated with other companies, which means borrowers may find their loans are now managed by a different company than when they last paid. Borrowers should confirm their loan servicer and update any personal information by visiting the Federal Student Aid website.

3 | Some borrowers will be eligible for a new income-based repayment plan

The Biden administration has introduced a new income-driven plan called SAVE that will reduce payments for millions of borrowers and can result in $0 payments for some. Unlike the President’s previous plan to cancel up to $20,000 in federal debt, the SAVE plan is intended as a permanent part of the student loan system and is available to both current and future borrowers.

SAVE’s income exemption is 225% of the federal poverty guidelines, making it available to up to 30 million borrowers. The income-based plan sets payments on undergraduate loans at 5% of discretionary income, down from 10% in the Revised Pay As You Earn program, which it replaces. The plan can apply to both undergraduate and graduate loans.

4 | Student loan debt assistance programs are available from some employers

Employers are able to offer workers up to $5,250 tax free for student loan repayment as part of their educational assistance benefit. Companies have long been able to offer tax-free assistance for qualified education expenses including tuition and fees. Since 2020, the same $5,250 limit has been applied to student loan payments.

While many employees could benefit from the plan, relatively few employers currently offer it. In a poll by the Society of Human Resources Management, just 8% of organizations said they offer student loan benefits, while nearly half offer tuition assistance.

5 | Starting in 2024, employers can match student loan payments with retirement contributions

The financial pressures of student loan debt often limit workers’ ability to contribute to company-sponsored retirement plans, causing them to miss out on employer matching contributions.

Under a provision of the SECURE 2.0 Act, which aims to boost retirement savings, employers can make contributions directly to employees’ retirement plans based on their student loan payments.

Section 110 of the SECURE 2.0 Act allows employers to begin matching workers’ monthly student loan payments with deposits to their retirement accounts as soon as January 1, 2024. Since it is a new benefit, borrowers should check with employers and encourage them to make the matching payments available.

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