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

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

Jemal Countess/Getty Images for People’s Rally

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Jemal Countess/Getty Images for People’s Rally

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

Jemal Countess/Getty Images for People’s Rally

Since March 2020, tens of millions of federal student loan borrowers have had the ability to take a break from student loan repayments without earning additional interest.

Now, after five extensions, three years and two presidents, that hiatus looks set to end.

The House of Representatives will vote on Wednesday on a deal to avert a historic public debt default by raising the nation’s debt ceiling by about two years. As part of a bipartisan compromise, the legislation includes a provision to restart student loan payments.

But, in particular, it does not touch on another issue much followed by borrowers: Biden’s plan to cancel up to $ 20,000 in debt. The fate of that larger plan still rests in the hands of the Supreme Court.

Here’s what you need to know.

What does the debt deal actually change for borrowers?

The agreement specifies when refunds will resume: 60 days after June 30. If the legislation passes, that means all federal student loan borrowers will have to start making payments again after August 29.

And this time it looks like it would be over: The debt deal prohibits the secretary of education from extending the pause on federal student loan payments without congressional approval.

The end of this lull will affect an estimated 43 million borrowers who, collectively, have student loan debt in excess of a trillion.

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

In November, the Biden administration said it intended to end the hiatus in late August, or 60 days at the latest after the Supreme Court ruled on Biden’s broader student debt relief plan.

What’s going on with the loan forgiveness plan?

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

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

Implementation of the plan has been stalled since a lawsuit brought by a coalition of conservative states reached the highest court.

Republicans fiercely opposed the plan, calling it enormously expensive handouts. The nonpartisan Congressional Budget Office estimated it would cost the government about $400 billion.

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

The court’s six conservative justices expressed skepticism of Biden’s arguments in February. A ruling in the case is expected in June or early July.

What are the next steps for the debt settlement (and for debtors)?

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

The deal narrowly exited the rules committee on Tuesday night in a 7-6 vote that sparked a barrage of criticism from some conservative members of the House.

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

Regardless of the specific timeline, if the deal passes as-is, federal student loan repayments will resume at the end of August.

The Education Department said it will notify borrowers before repayments begin.

NPR Elissa Nadwonny AND Cory Turner contributed report.