Is the debt deal changing student loan repayment? Here’s what you need to know

Emily Olson

May 31, 2023

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 option to take a break from paying back their student loans without earning additional interest.

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

On Wednesday, the House of Representatives will vote on a deal to avoid a historic government debt default by raising the nation’s debt ceiling for roughly two years. As part of a bipartisan compromise, the legislation includes a provision to restart student loan payments.

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 that broader 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 deal spells out when repayments resume: 60 days after June 30. If the legislation passes, that means all federal student loan borrowers will be expected to start making payments again after August 29. Their loans will accrue interest then as well.

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

The end of this pause will affect some 43 million borrowers who, collectively, owe over a trillion in student loan debt.

But, in effect, the new rules won’t change much about the current loan landscape. Even before Biden and McCarthy reached a deal, the Department of Education was readying the return to repayment.

Back in November, the Biden administration said it was planning to end the pause at the end of August, or, at the latest, 60 days after the Supreme Court rules on Biden’s broader student debt relief plan.

What’s happening with the loan forgiveness plan?

In February, the Supreme Court heard arguments over 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 of debt for anyone who received a Pell Grant to attend college and up to $10,000 for borrowers earning less than $125,000.

The plan’s roll-out has been on ice since a lawsuit brought by a coalition of conservative states made its way to the highest court.

Republicans have been fiercely opposed to the plan, calling it an enormously expensive handout. The nonpartisan Congressional Budget Office estimated it would cost the government roughly $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 during a national emergency.

The court’s six conservative justices showed skepticism towards 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 deal (and for debt 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 evening.

The deal narrowly advanced out of the Rules Committee on Tuesday evening with a 7-6 vote that set off a flurry of criticism from some conservative House members.

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

Regardless of the specific timing, if the deal passes as is, federal student loan repayments will be set to restart at the end of August.

The Education Department has said it’d notify borrowers before repayments begin.

NPR’s Elissa Nadworny and Cory Turner contributed reporting.