Debt Ceiling Deal Will End The Student Loan Repayment Pause

If the debt ceiling bill passes, the Education Department will be barred from extending the student loan repayment pause yet again.

After over three years, federal student loan borrowers will likely have to start repaying their debt. According to the terms of a debt ceiling deal struck by House Speaker Kevin McCarthy and President Biden, the extended pause on student loan repayment will end on August 30th. 

While a previous announcement from the Education Department had vowed to end the pause on August 29—provided the Supreme Court had not yet released a decision on Biden's student loan forgiveness plan—the debt ceiling deal solidifies this promise. If the bill passes, the Education Department will be statutorily barred from announcing yet another last-minute extension—as officials have done on eight occasions since August 2020, including two separate continuations of supposedly "final" extensions.

While fiscal conservatives have decried the recent debt ceiling deal due to its lackluster cap on non-defense discretionary spending, solidifying a start date for student loan repayment is a clear win for anyone concerned by the extended pause in student loan repayment.

"The president says that it was his plan all along to return to repayment by the end of the summer," Rep. Virginia Foxx (R-NC) told The Hill. "While I wish I could take his words at face value, his past actions have showed me otherwise. Passing the Fiscal Responsibility Act is the only sure-fire way to force a return to repayment and prevent the president from issuing another illegal extension."

But the Biden Administration has also claimed the student loan-related portions of the debt ceiling deal as a victory, focusing on the fact that critical elements of Biden's student loan forgiveness proposal were spared, including the supercharged Income-Driven Repayment plan. 

"President Biden protected the student debt relief plan in its entirety," one White House spokesperson told Newsweek. "The Administration announced back in November that the current student loan payment pause would end this summer—this agreement makes no changes to that plan."

Many progressives are framing the end of a nearly three-and-a-half-year pause on paying their student loans as disastrous.

"Borrowers got sold out. That's, I mean, the general feeling that I'm having, and I know a lot of our supporters are having today," Natalia Abrams, president of the Student Debt Crisis Center, told The Hill. "Trying to say you've won here when, in fact, for so many borrowers, that payment pause has actually been by far more relief for borrowers that owe $100,000 or $200,000 than the one-time debt cancellation—and plus a lot of people don't have faith in that."

According to the Committee for a Responsible Federal Budget, the student loan pause costs taxpayers about $5 billion every month–bringing the total cost to almost $200 billion by the time repayment goes into effect. 

Comments

[Sometimes a Great Notion]

Natalia Abrams, went on to say, "like the government needs to raise the debt ceiling to cover their loans but like totally that shouldn't apply to students".

[Doug Heffernan]

If student loan debtors are currently spending money into the economy that will soon have to be redirected towards debt payments instead, this should also reduce demand, inflation, and growth.

Is this good? I don’t know. I imagine it won’t be all sunshine and roses for everybody. Like the debtors themselves, and those that are benefitting from the increased consumer spending.

[P. Henry]

Those debt repayments aren’t going into mattresses.

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[Rossami]

As P.Henry says, that's an example of the Broken Window Fallacy. The money is going to be spent either way. Repaying your debts merely changes who has the cash to do the spending - the deadbeat or the lender.

[Red Rocks White Privilege]

If student loan debtors are currently spending money into the economy that will soon have to be redirected towards debt payments instead, this should also reduce demand, inflation, and growth.

No, injecting more liquidity into the economy raises inflation, it doesn't lower it.

[Diane Reynolds (Paul.)]

Debt Ceiling Deal Will End The Student Loan Repayment Pause
If the debt ceiling bill passes, the Education Department will be barred from extending the student loan repayment pause yet again.

Clarity in writing: Banning the ban restriction ban-ban which slows down the speedup restrictions.

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[TrickyVic (old school)]

"""Borrowers got sold out. That's, I mean, the general feeling that I'm having, and I know a lot of our supporters are having today," Natalia Abrams, president of the Student Debt Crisis Center, told The Hill. ""

Having to pay back a loan you agreed to pay back is getting sold out.

[Diane Reynolds (Paul.)]

The only thing they got sold out on is what they thought their student loan would buy them. Sort of like that $3000 an hour *checks notes* sex worker.

[Overt]

DRP- I think you need to just change your name to *note checker*

[Don't look at me!]

Joe Biden shits on his supporters. More at 11.

[perlmonger]

It was just leakage from his shorts.

[Elmer Fudd the CHUD]

Joe a Biden shits his diapers. 40 hours of archival footage available.

[Red Rocks White Privilege]

The only "student debt crisis" is the one that came about due to a bunch of degree programs designed to create marxist activists instead of productive citizens.

[JesseAz]

They are doing very well as DEI consultants.

[defaultdotxbe]

That originates in the existence of student loans. When everyone can get a guaranteed loan to go to college (regardless of grades, intelligence, or major) colleges created programs that any idiot could pass so they could collect all the loan funds they could.

[Wizard4169]

Or signed up students who had little hope of actually graduating. These people arguably got screwed hardest of all, since they were left with significant debts and no degree.

[Liberty_Belle]

Yes, persecute those damned students for trying to jockey for a better position in a technology driven capitalistic society. That’ll teach them. Better their money get sucked in by the government-to-banker pipeline , than to get recklessly spent in the open economy where it might benefit private businesses and possibly Mom & Pop shops.

[TryLogic]

Maybe, just maybe, you should consider that when you sign for a loan, you'll be expected to pay it off. Hence the term: Loan. It's not a fucking gift you're signing for.

[Bubba Jones]

On the other hand, if your business model is selling $250k paper to 17 year olds, maybe you should be on the hook for defaults.

Make these more easily dischargeable in bankruptcy and let the market sort it out.

[defaultdotxbe]

As long as the government is underwriting them allowing the loans to be discharged in bankruptcy is a bad idea IMO. How many people do you do think would file for bankruptcy immediately after graduation just to get rid of the loans they just accumulated?

[Medulla Oblongata]

The government is the one handing out the loans. Not just backing them or guaranteeing them for banks. Actually originating the loans and selling them to teens. The government doesn't want to get stiffed on no-collateral student loans they hold, which is why the government made it hard to discharge loans in bankruptcy.

[Flatulus]

That would require market-based loan terms, meaning lower loan amounts and much higher interest rates.

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[Diane Reynolds (Paul.)]

You misspelled "taxpayer-to-banker" pipeline.

*stares at what I just wrote*

Wow, the calculus kind of changes when I look at it that way. Too stupid to fail!

[Rossami]

The students actually "trying to jockey for a better position in a technology driven capitalistic society" are generally in STEM programs and don't have any trouble paying off their loans. Look at the majors running up huge volumes of debt and you'll find a stark lack of technology and/or betterment.

[Medulla Oblongata]

Simple rule of thumb: Don't take out a loan you can't pay back.

Here's a somewhat Swiftian proposal that college student loan interest rates should be set based on the unemployment rate by major. If certain majors have high unemployment today, then there is obviously a glut of people holding those majors and producing even more people with hard-to-employ degrees is not doing anyone any favors. Why subsidize the output of more students with worthless degrees?

So a student today seeking a degree in Social Sciences would be facing student loans that run at 8.5% interest, while a student trying to earn a degree in nursing or biochemistry would be paying 1.7%.

[Red Rocks White Privilege]

Yes, persecute those damned students for trying to jockey for a better position in a technology driven capitalistic society. That’ll teach them.

Oh, poor little college graduates who think their degree puts them higher on the social ladder than blue-collar workers.

Speaking as someone who completed grad school after the turn of the century and paid off all my student loans, go fuck yourself. Whining about how your dumb little paycheck that supposedly won't even buy you a house these days would be beneficial to the economy by being a mindless consooooooooooomer doesn't even pass the laugh test.

Maybe spend less of your paycheck on bullshit that you're taking out 25% interest on credit cards, and put that money towards your 7% interest student loan instead. You and your idiot generation might be surprised what a little delayed gratificaton will get you.

[MT-Man]

Door Dash is a favorite to see them spend on. To Red's point it's not hard to pay off a graduate degree even here in MT in a short amount of time if you watch your spending even on a lower starting wage.

[Medulla Oblongata]

The average student loan debt is about $31K. Or about the same as a mid-level new car. How many of these grads have ignored their student loan debt but have no qualms about signing a 5-year note for a $30K car? And they KNOW they have to pay THAT bill every month.

But we can't repo a student loan's collateral, because there wasn't any.

[Medulla Oblongata]

Another failed aspect of the Johnson's Great Society plans. Private banks were loathe to lend money to students with nothing more than a promise to pay them back. This made student loans have high interest rates commensurate with other forms of "signature loans", i.e., loans without collateral. These rates were "too high" and government took over.

In the mid-70s, via Sallie Mae (1972), Congress basically took over the student loan industry by loan guarantees and by buying loans from banks but letting banks administer them, in much the same way that Fannie Mae and Freddie Mac bought mortgages (and we know how that turned out). It was a short time later that Sallie Mae loans were made non-dischargeable (1976 and made even harder in 1978)..Thus, they created more corporate cronyism that privatized the profits, but made the losses (defaults) the taxpayers' burden. A new program providing direct loans was started in 1992, and continued in parallel with the FFEL/Sallie Mae loans.

And then, in 2010, having had enough of "corporate greed", Obama and Congress federalized student loans, and since then the predatory student loan lender has been the federal government.

By and large, since 2010, the federal government is directly the lender. FFEL loans (where banks originate a student loan backed by Sallie Mae, much like Fannie Mae backs mortgages) stopped then.

Wikepedia:

The Federal Family Education Loan (FFEL) Program was a system of private student loans which were subsidized and guaranteed by the United States federal government. The program issued loans from 1965 until it was ended in 2010. Similar loans are now provided under the Federal Direct Student Loan Program, which are federal loans issued directly by the United States Department of Education.

The FFEL was initiated by the Higher Education Act of 1965 and was funded through a public/private partnership administered at the state and local level. Following the passage of the Health Care and Education Reconciliation Act of 2010 on January 5, 2010 the program was terminated, and no subsequent loans were permitted to be made under the program after June 30, 2010.

[Super Scary]

But they promised! =(

[Eeyore]

I'm all for doubling the taxes on anyone with a college education. If they can't afford it then they are obviously squandering thier potential.

[JeremyR]

People keep posting this, apparently completely oblivious that it was ending on June 30th anyway.

https://studentaid.gov/announcements-events/covid-19?utm_source=mcp&utm_medium=email&utm_campaign=camp_788

[Medulla Oblongata]

But they said that several times before, then changed their minds and continued the pause anyway. There was no guarantee that it would have ended on this or any other schedule.

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