Enough Republicans and Democrats in Congress found enough common ground to pass a debt ceiling bill and avert a U.S. government default.
But as a result, people with student loan debt – whose payments were suspended at the start of the COVID-19 pandemic three years ago – will resume making monthly payments. The resumption of loan payments was one of the many other features contained in the bill.
The bill, which President Biden is expected to sign, calls for the resumption of student loan payments “60 days after June 30, 2023,” which would be Aug. 29. Estimates of total student loan balances vary but investment banking firm Jefferies has reported that about 45 million Americans owe more than $1 trillion, with average monthly payments of $393.
Economists are concerned about what this will mean to the U.S. economy. Payments were suspended in 2020 because it was believed the pandemic would lead to widespread unemployment and severe economic hardship for student loan borrowers.
While unemployment spiked in the first couple of months, the U.S. quickly had a labor shortage and most people who wanted jobs could find one. At the same time, the U.S. government paid out more than $1 trillion in stimulus payments.
Belt-tightening
Student loan borrowers who have grown accustomed to not making those payments will now have to factor them back into their monthly budgets. And the political climate makes Biden’s student loan debt forgiveness proposal appear less likely to prevail.
In fact, the Senate, controlled by Democrats, this week passed a House measure to repeal the administration’s debt forgiveness program. Biden has said he will veto it.
Opponents of debt forgiveness say it is unfair to ask taxpayers who didn't go to college and those who have paid off their student loans to pay for those who still owe.
Even with the veto, the debt forgiveness program is at the mercy of the U.S. Supreme Court, which is set to rule on the measure’s constitutionality. Biden’s executive order would grant 40 million borrowers up to $20,000 in student loan forgiveness.
