What the debt ceiling deal means for student loan payments
President Joe Biden and House Speaker Kevin McCarthy reached a deal that would force the administration to restart federal student loan payments and student loan interest at the end of summer 2023.
The deal comes after weeks of negotiation on the debt ceiling. If the deal goes through, the federal government will not be able to pursue any additional delay on student loan monthly payments and interest.
- The student loan payment pause was set to expire 60 days after June 30, 2023, or after the Supreme Court hearing on student loan forgiveness, whichever came first.
- This deal would make it so no extensions are possible and payments and interest will resume August 30, 2023.
- The proposed debt ceiling deal will not affect Biden’s proposed student debt cancellation.
The end of the student loan payment pause
The student loan payment pause started in March 2020 when President Donald J. Trump responded to the Covid-19 pandemic. Over the past few years, the Biden administration has announced an end to the student loan payment pause, then extended the policy after some time. With this debt ceiling deal, the Biden administration would not be able to implement another extension.
With the deal, student loan payments and interest will resume on Aug. 30. McCarthy told Fox News, “The pause is gone within 60 days of this being signed. So that is another victory because that brings in $5 billion each month to the American public.” However, the latest plan was for payment to resume at that time anyway.
Some people believe that payments should stay paused until student debt cancellation goes through. While that will not be the case, the administration could still potentially have plans for a grace period or other kinds of flexibility when payments restart.
The Biden administration’s response to the deal
The Biden administration stated that the deal only cemented current plans. Abdullah Hasan, White House spokesperson, said in a statement, “The Administration announced back in November that the current student loan payment pause would end this summer — this agreement makes no changes to that plan.”
This statement echoes statements by Education Secretary Miguel Cardona over the past few weeks saying that the Education Department was preparing for payment to resume. “Despite Republicans’ efforts to end targeted student debt relief and move up our planned end to the payment pause, we will ensure a smooth return to repayment process,” Cardona said on Twitter on May 29.
What is next for student loans
The House is expected to vote on the debt ceiling deal this week, possibly as early as May 31, ahead of the default deadline June 5. Whether the deal goes through or not, student loan payments seem set to resume at the end of the summer.
Questions still remain about student debt forgiveness, but it is not affected by the current debt ceiling deal. “President Biden protected the student debt relief plan in its entirety,” Hasan said.
Last week, the House passed a resolution that would end the payment pause and Biden’s debt cancellation plan. However, the Senate has not taken up the resolution, and Biden has said he would veto it. So while the payment pause end soon, the Supreme Court still has yet to make its decision on student loan forgiveness. In the meantime, borrowers with student loans should begin preparing to make payments again at the end of the summer.
