What the Bipartisan Debt Ceiling Deal Means for Federal Student Loan Borrowers

The bipartisan debt ceiling deal, if enacted into law, will disappoint borrowers hoping for an extension of the federal student loan payment pause.

The Biden administration had previously extended the pause multiple times, but this time, Education Secretary Miguel Cardona may not have the authority to do so. The bill includes a provision that prohibits the extension of the payment pause, which will cease to be effective 60 days after June 30.

As the Supreme Court is expected to rule on a separate student loan forgiveness program around the same time, the resumption of payments will be a significant challenge.

When the payment pause ends, approximately 44 million people will need to resume making payments on their federal student loans. There are concerns about the process going smoothly, as borrowers may be confused about the amount owed, payment deadlines, and procedures.

Additionally, many borrowers will have a different loan servicer than before, which could lead to missed payments and fees. Congress allocated the Federal Student Aid office a budget that is $800 million less than what the Biden administration requested, raising concerns about the availability of customer service support.

To navigate the resumption of payments, student loan experts suggest that borrowers contact their loan servicer promptly with any questions or concerns. This is especially important for those interested in enrolling in income-driven repayment plans, which can reduce monthly payments based on income and family size but require additional paperwork. Regularly checking the Federal Student Aid (FSA) website for updates on payment resumption is also advised.

The fate of the Biden administration’s student loan forgiveness program rests with the Supreme Court. If allowed to proceed, the program would forgive up to $10,000 of federal student loan debt for individual borrowers who earned less than $125,000 in either 2020 or 2021. Married couples or heads of households earning less than $250,000 annually could also be eligible for forgiveness. Qualifying borrowers who received a federal Pell grant while in college could potentially have up to $20,000 of their debt forgiven. However, there are ongoing lawsuits claiming that the administration is exploiting the pandemic to fulfill campaign promises, and no debt cancellation has occurred yet.


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