Student loan payment pause nixed in debt limit agreement

The deal reached by President Joe Biden and House Speaker Kevin McCarthy to raise the nation’s debt limit would force the administration to resume collecting federal student loan payments and interest for millions of Americans at the end of the summer.

The agreement, the text of which was unveiled Sunday evening after weeks of negotiations between the White House and GOP leaders, would terminate the ongoing pause on monthly payments and interest after Aug. 30.

But the deal would not affect Biden’s student debt cancellation plan, which many Republicans had been seeking to repeal as part of the debt ceiling negotiations. That plan, which provides up to $20,000 of loan forgiveness per borrower, remains in limbo at the Supreme Court, which is expected to rule on whether it can proceed in the coming weeks.

Key context

Cementing the plan to restart payments into law curtails the Biden administration’s potential options for responding to a possible Supreme Court ruling in the coming weeks that blocks its debt cancellation plan.

Progressives and student debt activists have said that payments should remain paused at least until the Biden administration is able to deliver on the debt cancellation it promised last year.

The Biden administration over the last couple years has several times announced an end to the payment pause only to reverse course and issue another extension of the policy. But that path would be off the table under the debt ceiling deal.

The bill would prohibit the Secretary of Education from using “any authority to implement an extension” of the ongoing pause on federal student loan payments and interest.

It does not specify how or when precisely the Education Department must resume collecting payments, shielding the administration’s plans to offer borrowers some type of grace period or extra flexibility with payments as it restarts repayment.

Biden view

White House officials see the deal as codifying into law what the administration had already been planning to do, which was resume collecting payments in September.

“President Biden protected the student debt relief plan in its entirety,” White House spokesperson Abdullah Hasan said in a statement. “The Administration announced back in November that the current student loan payment pause would end this summer — this agreement makes no changes to that plan.”

The Education Department has said that payments would resume 60 days following either a court decision or June 30, whichever came first. Education Secretary Miguel Cardona said publicly in recent weeks that he was committed to that timeline, and Education Department officials have already been preparing for the resumption of payments this fall.

“Despite Republicans’ efforts to end targeted student debt relief and move up our planned end to the payment pause, we will ensure a smooth return to repayment process,” Cardona said on Twitter on Sunday.

Cardona added that the “deal also protects our ability to pause student loan payments should that be necessary in future emergencies.” Some provisions in the House GOP debt ceiling bill would have permanently curtailed the Education Department’s power to cancel or modify student loans.

GOP pitch

McCarthy hailed the elimination of the student loan pause as a “victory” on Sunday as GOP leaders pitch the plan to many members of their caucus who wanted it to go further in stopping Biden’s student loan policies.

In an interview with Fox News, McCarthy noted that the pause costs the government roughly $5 billion each month in forgone revenue. He touted the legislation to make sure that borrowers would be required to repay their student debt even if the Biden administration’s debt cancellation program gets struck down at the Supreme Court.

What’s next

The House is expected to vote on the deal as early as Wednesday. Senate Majority Leader Chuck Schumer has told senators to prepare for possible votes next weekend ahead of the default deadline of June 5 announced by Treasury Secretary Janet Yellen.