A major student loan relief program that has helped millions of Americans is set to end later this month, with potential credit report and debt collection implications for borrowers. The “on-ramp” program, which provided flexibilities for missed payments, is coming to a close after being established by the Biden administration to ease the transition from Covid-19 forbearance to normal repayment. While the program protected borrowers from negative credit reporting and default during the on-ramp period, interest still accrued and time spent in the program did not count towards student loan forgiveness.
After September 30th, borrowers will lose the protections of the on-ramp program, leading to possible late fees, penalties, and credit damage for missed payments. With the end of the on-ramp and a related program called Fresh Start, defaulted borrowers could face severe financial penalties and credit damage. Time spent in delinquency and default typically does not count towards federal student loan forgiveness programs, which could impact borrowers seeking relief through income-driven repayment plans or Public Service Loan Forgiveness.
The Biden administration had hoped to mitigate the impact of ending these programs by introducing new student loan relief initiatives, including the SAVE plan and a debt relief plan for mass loan cancellation. However, legal challenges from Republican-led states have blocked these programs, causing chaos in the student loan repayment system and limiting borrowers’ access to relief options. Advocates are calling on the administration to extend the on-ramp program or pause all student loan payments again to protect borrowers from the consequences of these legal challenges.
The Debt Collective, a debtors’ union advocating for student loan borrowers, criticized the administration for potentially forcing working families to pay a massive bill while the student loan system is in disarray. Meanwhile, the Student Borrower Protection Center called for Secretary Cardona to suspend payments for all borrowers to protect them from the chaos caused by legal challenges. Despite these calls for action, the Biden administration has not indicated whether it plans to extend the on-ramp program, pause payments, or offer further relief for borrowers outside of the blocked initiatives.
As the end of the on-ramp program and related protections approaches, borrowers with federal student loans face uncertainty and potential financial challenges. Without new relief initiatives in place, many borrowers may struggle to make payments and avoid credit damage or default. The future of student loan forgiveness and repayment remains uncertain, leaving millions of Americans awaiting a resolution to the ongoing legal challenges and advocating for continued support from the Biden administration.
