The Biden administration and Congressional leaders reached a deal last week regarding the debt ceiling, one that will now have significant consequences for student loan borrowers. Once the agreement is signed into law, payments on all federal student loans that have been on pause since the start of the COVID-19 pandemic will be reinstated as of August 2023.
This deal affects approximately 43 million student loan borrowers who must now figure out how to make these payments after receiving relief for years since 2020.
For many, the student loan payment pause allowed them to get by during a difficult financial time where many were put out of work or were underpaid. Other borrowers used the money they would have paid towards student loan bills towards larger expenses, such as purchasing a home, or paying for childcare expenses.
The pause first went into effect in March 2020 after former President Donald Trump signed the CARES Act into law, which allowed federal student loan holders to forgo payments without receiving any penalties. The pause has been extended several times by President Joe Biden as increasing costs due to inflation have continued to plague consumers.
During this time, accruing interest on federal student loan payments was also suspended. The pause on student loan payments applied only to federal student loans and did not apply to borrowers with privately held loans.
Critics of the debt ceiling deal have said the White House should have fought harder for student loan relief to not be a part of the plan, especially while the administration’s larger plan to forgive billions of dollars in student loan debt is currently being held up with legal challenges. They argue that borrowers were theoretically thrown under the bus during these negotiations. As a result, now millions of borrowers are facing a future with bills that they may not be able to afford. Many of these borrowers, including those who graduated in 2020 and after, have yet to begin making payments on their student loans.
The Department of Education Secretary, Miguel Cardona, has stated that the Department is ready and prepared to deal with the fallout from this change. He issued a statement on Twitter last Sunday, promising a “smooth return to the repayment process” and stating that the deal protects their ability to pause student loan payments in the future during times of emergency.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.