Federal student loan repayments are about to resume, but some borrowers may not be prepared to restart payments. To ease the financial strain of a new monthly bill, the U.S. Department of Education has created an “on-ramp” for student loan repayments.

But what does this on-ramp really look like? And how does it benefit borrowers? Here’s what you need to know.

What Is The On-Ramp To Student Loan Repayment?

As the forbearance period draws to a close, the DOE has taken a proactive stance to ensure a smooth transition for borrowers with an on-ramp approach, acknowledging that sudden resumption of payments could be financially overwhelming for many individuals.

Designed to gradually reintegrate borrowers into the rhythm of student loan repayments, this new approach will essentially allow borrowers to skip payments for a period of time if needed.

Under this provision, borrowers will have a one-year grace period for missed payments from October 1, 2023 to Sept. 30, 2024. Those who have missed or late payments won’t be reported to credit reporting agencies, be considered in default, or be sent to collection agencies.

See Also: When Does Student Loan Repayment Resume?

How Does Skipping Payments Affect Borrowers?

Though missing a payment won’t damage your credit score, interest will still accrue during this year-long period, but it will not capitalize at the end of the on-ramp period. If you forgo payments, your balance will be larger when the on-ramp period ends, due to accrued interest.

See Also: One Thing Financial Planners Wish Doctors Knew About Student Loan Debt

Why Is An On-Ramp Needed?

The Biden Administration has said that resuming student loans could trigger a historic spike in defaults and delinquencies.

During the pandemic, many borrowers took out loans, purchased homes or developed other financial obligations which may cause them to have trouble adding student loan payments to their monthly bills. According to ConsumerFinance.gov, about 1 in 5 student loan borrowers have risk factors that indicate that they may struggle when payments resume.

Should I Skip My Student Loan Payments During The On-Ramp Period?

Borrowers should not view this on-ramp as just another forbearance period, because interest will still accrue and will affect your balance.

The White House recommends that if borrowers can pay on their loans, they should. The on-ramp is meant to help borrowers who are unable to make their payments and need time to adjust to the new expenses.

See Also: You’re Not Alone: Many Doctors Need Help Navigating Student Loan Debt

How Could The On-Ramp Benefit Me?

As stated previously, if you can make your student loan payments, you should. The on-ramp likely will not provide any benefits to a borrower who has the money to make their payments on-time each month.

For those who are unable to make their payments, this on-ramp can provide a tool for adjusting to an additional payment. If you must forgo making some or all of your monthly payments during this year, we recommend making a plan for your payment strategy once the on-ramp period ends to avoid facing being reported to credit reporting agencies or being sent to collections.

How Do I Qualify For The On-Ramp?

Borrowers don’t need to take any action to take advantage of the on-ramp benefits. Any federal student loan borrower will automatically receive the grace period if needed.

See Also: Understanding Student Loans: Frequently Asked Questions Answered