Debt Limit Deal or a Raw Deal for Students? A Damper on Biden’s Student Loan Relief Plans

Amidst the swirling political drama around the debt ceiling, student debtors find themselves in a precarious situation. The recent debt ceiling agreement forged by President Joe Biden and House Speaker Kevin McCarthy has tossed a wrench into the plans of student debtors, cutting short their reprieve and forcing them back into repayment come the end of summer.

This bill sets a firm expiration date for the student loan payment moratorium that’s been in place since March 2020 – August 30. This means repayments would resume in September, and potential default looms large for those unable to meet their obligations. Moreover, this deal restricts the Biden administration from implementing any further extensions of this pause, unless expressly approved by Congress.

This drastic shift, if greenlit by Congress, will unfold in a time of uncertainty for those buried under the weight of student debt. The Supreme Court has yet to pass a judgment on Biden’s proposal to write off up to $20,000 in student debt for borrowers nationwide. With the threat of repayments resuming, countless debtors could find themselves paying off their full loans despite the potential for debt relief under Biden’s plan.

Debtors and advocates are reeling from this blow, arguing that the premature end to the payment pause is reckless, especially with a Supreme Court decision pending.

The Debt Collective, a debtor’s union, expressed their thoughts via Twitter, criticizing the move for putting “the cart before the horse.” Their concern? Even if Biden reattempts debt relief under a different legal jurisdiction, it might take weeks or months to implement, during which borrowers will be expected to resume repayments sans relief.

Moreover, the Debt Collective recently revealed that the Republican states’ legal arguments against Biden’s student debt plan appear to be outright false. Despite this, the Supreme Court seems to lean towards the Republican stance and is likely to quash the plan.

A halt on debt relief coupled with reinstating loan payments could deliver a severe blow to the economy. A recent Federal Reserve survey revealed that in 2022, 37% of Americans couldn’t afford a $400 emergency expense, and 35% said they were financially worse off than the previous year—a record high. Resuming loan payments will only exacerbate this economic strain, disproportionately affecting lower-income, Black, and Latinx Americans who bear the brunt of student debt.

Meanwhile, Republicans, bolstered by two conservative Democrats, are ramping up their efforts against student debt forgiveness. Recent legislation from the House Republicans aims to halt Biden’s debt cancellation plans, restart loan payments, and harshly enforce retroactive payments on paused student debts—a ruthless triple threat to struggling borrowers.

So, what’s next? Will our student debtors be thrown back into the deep end, or can a stroke of judicial wisdom avert this crisis? As the political game of chess unfolds, the futures of millions of student debtors hang in the balance. Stay tuned.