The debt ceiling agreement concluded on Sunday by President Joe Biden and House Speaker Kevin McCarthy will reinstate student loan payments and interest accrual in late August.
McCarthy stated that the halt would end within 60 days of the bill’s signing, despite the fact that the legislation, as well as existing plans to end the delay, specifies a deadline of 60 days after June 30. Therefore, this is another victory, as it generates $5 billion per month for the American public.
How Debt Ceiling Talks Could Affect Student Loan Payments?
The agreement between Biden and McCarthy would suspend the debt limit until January 2025. The proposal will now be put to a vote in Congress.
Since the onset of the pandemic, student payments and interest have been suspended, a moratorium first adopted and prolonged by former President Donald Trump and then extended again by Vice President Joe Biden.
However, this will not be the situation for long. The Biden administration, whose plan to forgive massive amounts of student debt is presently on hold at the Supreme Court, is under increasing pressure to release the moratorium. Even before the agreement reached on Sunday, efforts were underway to reinstate student loan payments.
A resolution that passed the House on Wednesday would end the payments as well as Biden’s larger proposal to forgive up to $20,000 in student loan debt for Americans with incomes of less than $125,000.
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Department of Education Reiterates Moratorium’s End
Prior to that, in March, the student loan refinancing company SoFi filed a lawsuit against the federal government to terminate the suspension. Secretary of Education Miguel Cardona emphasized that the moratorium has an expiration date.
In a May hearing before the Senate Appropriations Committee, the secretary stated that borrowers should be prepared to resume payments no later than 60 days after June 30 or after the Supreme Court rules on the two cases challenging Biden’s expansive relief plan.
Internal Education Department documents indicate that the process may not recommence until at least October. According to the documents, department officials anticipate that the transition back to payments will take several months.
A White House official stated in a statement that Biden “protected the student debt relief plan in its entirety,” including provisions for mass forgiveness and enhancements to income-driven repayment options. “The administration announced in November that the current pause on student loan payments would end this summer,” the official said, adding that Biden retained his administration’s “authority to pause payments as necessary in the event of future emergencies.”
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