Debt ceiling deal could unfreeze student loan repayments. Here’s what borrowers need to know.

Roughly 40 million borrowers of federal student loans will soon need to start paying their bills again under a deal reached by President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) to bring temporary relief to the recurring debt ceiling crisis.

The 99-page legislative package (pdf), which McCarthy expects to bring to a vote in the Republican-led House on May 31 before heading to Democrat-majority Senate, would allow the federal government to borrow more money to operate while also avoiding a default on its old debts.

As part of the deal, the federal government would resume the collection of student loan payments and interest, which has been halted for three years. The pause was first ordered by former President Donald Trump in March 2020 as a way to ease financial pressure on Americans during the COVID-19 pandemic and has since been extended nine times under both the Trump and Biden administrations.

When Will the Student Loan Pause End?

According to the deal, which still needs approval from Congress, the pause would end 60 days after June 30. This means borrowers would need to start repaying loans near the end of August, at which point interest would also start accruing again.

But the situation is complicated by a pending U.S. Supreme Court decision on two cases challenging Biden’s plan to “forgive” hundreds of billions of dollars in federal student loan debt.

At the core of those cases is the question of whether the president has the authority to implement his $400 billion plan, which would erase up to $10,000 in student loan debt for every borrower who earns less than $125,000 per year while canceling up to $20,000 for each Pell Grant recipient who meets that income standard.

On Nov. 22, 2022, Biden announced the most recent extension of the pause on student loan debt collection, saying that if the Supreme Court rules on his plan before June 30, the pause will expire 60 days after that final decision, regardless of the lawsuits’ outcome.

If the legal challenges haven’t been resolved by June 30, payments would resume 60 days after June 30.

Overall, borrowers can expect to restart paying bills no later than the final days of August, although it could be earlier.

Could a Student Loan Repayment Pause Get Another Extension?

Although the student loan repayment pause has been extended many times over the past three years, the Nov. 22, 2022, extension will be the last one, as the bipartisan debt ceiling deal would explicitly prohibit the Biden administration from doing it again.

Specifically, the deal states that Education Secretary Miguel Cardona “may not use any authority to implement an extension” of the pause unless Congress otherwise authorizes him to do so, which is extremely unlikely to happen.

Over the weekend, Cardona applauded Biden for “averting a crisis.” He also praised the deal for resuming the collection of student loan payments on a similar schedule planned by his department.

“Despite Republicans’ efforts to end targeted student debt relief and move up our planned end to the payment pause, we will ensure a smooth return to repayment process,” he wrote on Twitter. “The deal also protects our ability to pause student loan payments should that be necessary in future emergencies.”

Republicans originally suggested that education spending be held to fiscal year 2022 allocations as part of their effort to slash spending across federal government agencies. This proposed change translates to a 22 percent, or $17.4 billion, decrease from current fiscal 2023 levels.

By contrast, Cardona is proposing a $90 billion budget for the coming fiscal year, representing a $10.8 billion increase from fiscal 2023.

How Will the Supreme Court Decide on Biden’s Student Loan Debt Cancellation Plan?

It’s unclear if the Supreme Court will rule against or in favor of Biden’s multibillion-dollar plan to cancel student loan debt. The decision could have a significant impact on millions of borrowers and the future of student loan debt in the United States.