What the debt ceiling agreement means for student loan payments

For millions of Americans with federal student debt, the payment holiday is about to end.

Legislation to raise the debt ceiling and cut spending includes a provision requiring borrowers to pay back their loans by the end of the summer after a year-long pause imposed during the coronavirus pandemic.

President Biden had already warned that the break would end around the same time, but the legislation, if passed in the coming days, would prevent him from issuing another last-minute extension, as he has done several times.

The end of the hiatus would affect millions of Americans who have taken out federal student loans to pay for college. In the United States, 45 million people owe $1.6 trillion on such loans — more than Americans owe on any form of consumer debt other than mortgages.

The economic impact of the pandemic has faded since President Donald J. Trump first suspended student loan payments in March 2020. Many Americans lost their jobs at the start of the public health crisis, leaving them unable to pay back their loans on time. The number of jobs in the United States is now exceeding prepandemic levels.

Speaker Kevin McCarthy promoted the debt ceiling legislation over the weekend, saying on “Fox News Sunday” it would end the pause on student loan payments “within 60 days of being signed.”

In fact, the legislation would follow the same timeline the Biden administration had previously outlined, ending the payment pause no later than August 30.

A spokesperson for Mr McCarthy did not respond to an email asking for comment.

Even now that the break has ended, some borrowers may still see some relief if the Supreme Court allows Mr. Biden to move forward with a plan to forgive up to $20,000 in debt for some people with outstanding balances.

Mr Biden’s plan would forgive $10,000 in federal student loans for those earning less than $125,000 a year. People who received Pell grants for low-income families could qualify for an additional $10,000 in debt forgiveness.

But the plan was challenged in court as an unlawful use of executive power, and during oral arguments in February, several judges appeared skeptical of the program. A court ruling is expected at any time, but is expected next month.

White House officials have repeatedly said they are confident in the legality of the president’s plan. But debate over the plan and the broader issue of student loans was fierce in Congress.

Republicans have vowed to block the president’s plan if the courts don’t. But they have so far failed to keep that promise, despite repeated attempts.

Last month, House Republicans passed a bill to raise the debt ceiling that would have blocked the student debt forgiveness plan and ended the temporary freeze on payments. That bill was shelved after negotiations began with the White House over the debt ceiling and spending cuts.

Last week, the House adopted a resolution which the Congressional Review Act would use to reverse the president’s debt cancellation plan. But the Senate has not adopted the measure and Mr Biden has said he would veto it.

Instead, the compromise debt ceiling legislation now being considered by lawmakers only requires ending the payment pause — a move the president had already announced he would make. It would not block the debt cancellation plan.

In addition, White House officials said the legislation would not deny the Biden administration the ability to pause student loan payments during a future emergency, as Republicans had attempted to do.

A White House spokesman said the president was pleased that Republicans had failed to block his debt cancellation plan in debt ceiling legislation.

“The House Republicans were unable to get a penny of relief for the 40 million eligible borrowers, most of whom earn less than $75,000 a year,” said spokesman Abdullah Hasan. “The administration announced in November that the current student loan payment hiatus would end this summer — this agreement does not change that plan.”