Debt deal sets hard date on student loan repayment

Agreement stops Biden from issuing extension; no effect on forgiveness

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

Legislation to raise the debt ceiling and cut spending includes a provision that would require borrowers to begin repaying their loans again by the end of the summer after a yearslong pause imposed during the coronavirus pandemic.

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

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

The economic impact of the pandemic has faded since former President Donald Trump first paused student loan payments in March 2020. Many Americans lost their jobs at the outset of the public health crisis, undercutting their ability to repay their loans on time. The number of jobs in the United States now exceeds pre-pandemic levels.

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

In fact, the legislation would follow the same timeline that the Biden administration had previously outlined, ending the pause on payments Aug. 30 at the latest.

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

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

Biden’s plan would cancel $10,000 of federal student loan debt for those who make under $125,000 a year. People who received Pell grants for low-income families could qualify for an additional $10,000 in debt cancellation.

But the plan was challenged in court as an illegal use of executive authority, and during oral arguments in February, several justices appeared skeptical of the program. A ruling from the court could come at any time but is expected next month.

The compromise debt ceiling legislation now under consideration by lawmakers only requires ending the pause on payments — a move the president had already said 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 sought to do.

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

“House Republicans weren’t able to take away a single penny of relief for the 40 million eligible borrowers, most of whom make less than $75,000 a year,” said the spokesperson, Abdullah Hasan. “The administration announced back in November the current student loan payment pause would end this summer; this agreement makes no changes to that plan.”