How the debt ceiling deal would affect student loan borrowers


Get real time updates directly on you device, subscribe now.

Anadolu Agency | Anadolu Agency | Getty Images

Deal ends the payment pause, likely for good

The pause on federal student loan payments is one of the few remaining Covid-related relief measures still in effect. It was first announced by then president Donald Trump in March 2020, and has since been extended eight times.

The policy has suspended the accrual of interest on federal student debt and allowed borrowers to forgo making their payments without facing any penalties. Tens of millions of Americans are taking advantage of it. Since the start of the public health crisis, those who have benefited from the pause have saved around $5,000 in interest on average, according to calculations by higher education expert Mark Kantrowitz.

In the current version of the debt ceiling agreement, the pause would be terminated 60 days after the end of June. The U.S. Department of Education would also be restricted in its ability to extend this particular relief again, with another prolongment likely only possible from Congress.

What's at stake as the Supreme Court weighs student loan debt forgiveness

The deal codifies an assurance for Republicans that Biden will head into 2024 as Americans’ debt collector in chief.

Astra Taylor

co-founder of the Debt Collective

“This deal takes away the White House’s ability to extend the current payment pause if the Supreme Court kills the relief, making it more likely 40 million people will have to repay loans that the president promised were canceled,” Taylor said.

The Biden administration has warned that resuming student loan payments without being able to carry out its debt forgiveness plan could trigger a historic spike in defaults in delinquencies.

Student loan forgiveness, other relief, not in agreement

The agreement to avert economic default doesn’t include a cut to Biden’s plan to cancel up to $20,000 in student debt for tens of millions of Americans. House Republicans wanted to halt the program.

Still, experts expect the Supreme Court to strike down the policy, given that the conservative justices outnumber the liberals. A decision by the highest court is expected in June or July.

The Biden administration’s “pending regulatory changes” to student loan repayment would also not be impacted by the deal, said Kantrowitz.

Most notably, the administration would be able to continue its work to implement a new repayment plan, under which qualifying borrowers would pay just 5% of their discretionary income toward their student debt each month.



Get real time updates directly on you device, subscribe now.

Leave A Reply

Your email address will not be published.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More