When do student loan repayments resume? Here’s how the debt deal changes things: NPR

Student borrowers gather outside the Supreme Court building in February 2023. The court’s decision on President Biden’s debt relief plan is expected in June or July.

Countess Jemal/Getty Images for the Gathering of the People

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Countess Jemal/Getty Images for the Gathering of the People

Student borrowers gather outside the Supreme Court building in February 2023. The court’s decision on President Biden’s debt relief plan is expected in June or July.

Countess Jemal/Getty Images for the Gathering of the People

Since March 2020, tens of millions of federal borrowers have had the opportunity to take a break from paying their student loans without earning additional interest.

Now, after five extensions, three years and two presidents, that hiatus seems about to end.

On Wednesday, the House of Representatives will vote on a deal to avoid a historic public debt default by raising the national debt ceiling for about two years. As part of a bipartisan compromise, the legislation includes a provision to reinvigorate student loan repayments.

But, notably, it doesn’t touch on another highly watched issue for borrowers: Biden’s plan to erase up to $20,000 in debt. The fate of this larger plan still rests in the hands of the Supreme Court.

Here’s what you need to know.

What does the debt agreement actually change for borrowers?

The agreement specifies when refunds resume: 60 days after June 30. If the legislation passes, it means all federal student loan borrowers will have to start making payments again after Aug. 29. Their loans will then also accrue interest.

And this time, it looks like it really would be the end: the debt deal prohibits the education secretary from extending the pause on federal student loan repayments without congressional approval.

The end of this pause will affect some 43 million borrowers who collectively owe more than $1 trillion in student loan debt.

But, in fact, the new rules won’t change much of the current lending landscape. Even before Biden and McCarthy reached an agreement, the Department of Education was preparing the return to reimbursement.

In November, the Biden administration said it planned to end the hiatus at the end of August, or, at the latest, 60 days after the Supreme Court rules on the broader student debt relief plan. of Biden.

What happens with the loan cancellation plan?

In February, the Supreme Court heard arguments on Biden’s broader student loan debt relief plan, which is a separate issue from the repayment pause.

Biden’s plan would forgive up to $20,000 in debt for anyone who received a Pell Grant to attend college and up to $10,000 for borrowers earning less than $125,000.

Rollout of the plan has been frozen since a lawsuit by a coalition of conservative states was brought to the highest court.

Republicans fiercely opposed the plan, calling it a hugely expensive giveaway. The nonpartisan Congressional Budget Office has estimated it will cost the government about $400 billion.

The Biden administration has said the program is well within its executive powers under the HEROES Act, a 2003 law that gives the Department of Education the power to forgive student loan debt in the event of a national emergency. .

The court’s six conservative justices were skeptical of Biden’s arguments in February. A decision in this case is expected in June or early July.

What are the next steps for the debt deal (and for the borrowers)?

For now, all eyes are on the House of Representatives, which is expected to vote on final passage of the debt deal on Wednesday night.

The deal narrowly emerged from the Rules Committee on Tuesday night with a 7-6 vote that sparked a wave of criticism from some conservative members of the House.

If the deal passes the House, it then passes the Senate. Majority Leader Chuck Schumer, D-New York, said he hoped to pass the legislation by June 5.

Regardless of the exact timing, if the deal passes as is, federal student loan repayments are expected to restart at the end of August.

The Department of Education said it would notify borrowers before repayments begin.

NPR Elissa Nadworny And Cory Turner contributed report.