Debt Ceiling Agreement Ends Temporary Suspension of Student Loan Payment
The recent debt ceiling agreement between President Joe Biden and House Speaker Kevin McCarthy will bring an end to the pause on federal student loan payments and interest collection by the Education Department after August 30th.
Following its passage in the House, the Senate is scheduled to vote on the agreement on Thursday. This legislation aims to raise the federal debt ceiling to prevent the Treasury from defaulting on its obligations before the “X-date,” which marks the point where the government can no longer employ “extraordinary measures” to manage the national debt.
The deal, which was reached between the President and the House Speaker over the past weekend, comes after weeks of negotiations. Congressional Republicans sought spending cuts and other concessions in exchange for raising the debt ceiling.
Once the debt ceiling agreement is signed into law, as anticipated, it effectively ensures that the Biden Administration cannot extend the pause on student loan payments beyond August 30th, as it has done on several occasions.
However, the White House has expressed its intention to conclude the student loan payment pause by September at the latest. In November, it was announced that student loan payments would resume 60 days after a Supreme Court decision on President Biden’s student loan forgiveness plan or by June 30th, whichever comes first.
“We will ensure a smooth return to the repayment process,” stated Education Secretary Miguel Cardona on Twitter last Sunday. The Education Department has also advised student loan companies to prepare for the conclusion of the payment pause.
It’s important to note that the debt ceiling agreement does not terminate President Biden’s student loan forgiveness plan, which is currently under review by the Supreme Court to determine its legality.
If the Supreme Court approves President Biden’s student loan forgiveness plan, it will not apply to private student loan borrowers. However, individuals can potentially lower their monthly private student loan payments by refinancing at a lower interest rate. Visit Credible to obtain a personalized rate within minutes.
History of the Student Loan Payment Pause
In light of the COVID-19 pandemic, President Donald Trump made an announcement in March 2020 regarding the waiver of interest on federal student loans.
“To assist our students and their families, I have decided to waive interest on all student loans held by federal government agencies until further notice,” stated Trump during a Rose Garden address where he declared COVID-19 a national emergency. “This is a significant step for many students who find themselves in a challenging situation right now, especially considering the closure of numerous educational institutions.”
Subsequently, in the same month, Trump signed the CARES Act, which not only suspended federal student loan payments but also extended the interest waiver until September 30, 2020. Since then, these measures have been repeatedly extended by President Biden.
However, these benefits are set to expire after the summer of 2023. Nevertheless, many Americans have expressed concerns about their lack of preparedness for the resumption of loan payments. In fact, a Morning Consult study published prior to the initial restart of payments in early 2023 revealed that 58% of individuals with student debt stated that they would be unable to afford their payments.
If you hold private student loans, it is important to note that you will not be eligible for federal relief. However, you may be able to reduce your monthly payments by refinancing at a lower interest rate. Visit Credible to compare offers from multiple lenders without any impact on your credit score.
Update on Student Loan Forgiveness
In the coming weeks, the Supreme Court is expected to issue a ruling on the legality of the Biden administration’s student loan forgiveness plan. This initiative aims to forgive a maximum of $10,000 in federal student loans for eligible borrowers and up to $20,000 for those who also received Pell Grants.
The Supreme Court is currently reviewing two lawsuits that challenge the legality of the plan. In one lawsuit, the states of Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina argue that the president has exceeded his powers and has incorrectly utilized the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 to fulfill a campaign promise.
The HEROES Act grants Congress the authority to relax restrictions on student debt relief during national emergencies. However, in April, President Biden signed a House bill that ended the COVID-19 national emergency.
Nonetheless, in an opening brief, the Biden administration asserts that the plan falls “comfortably within the plain text of the Act.” In another case, two individuals argue that the debt relief plan is unlawful because the public was not given sufficient time to provide comments before its implementation.
If you are a private student loan borrower seeking to lower your monthly payments, you may want to consider refinancing your private student loans at a lower interest rate. Visit Credible to consult with an expert and have your questions answered.