Proposal to End Student Loan Payment Pause Faces Uphill Battle in Congress

This article discusses the proposal to end the student loan payment pause and its implications for borrowers. It explores the likelihood of the proposal’s success and potential consequences and offers advice on how student borrowers can prepare for the resumption of loan payments. Stay informed and be ready for upcoming changes in student loan regulations.

Questions Answered in this Article

1. What is the proposal in Congress regarding the student loan payment pause?

• The proposal aims to terminate the student loan payment pause, nullify the president’s debt cancellation plan, and require public servants to repay forgiven debt.

2. What is the likelihood of the proposal succeeding?

• The proposal is unlikely to succeed as it would require a two-thirds majority in both the House and Senate to override President Joe Biden’s veto.

3. What are the potential consequences of implementing the proposal?

• The proposal would restore the debt of over 260,000 borrowers who had already earned loan forgiveness under income-driven repayment plans and the Public Service Loan Forgiveness program. It would also erase nine months of progress toward forgiveness for an additional two million borrowers.

4. What is the Congressional Review Act (CRA), and how is it used in this case?

• The CRA is a tool for lawmakers to overturn final rules issued by federal agencies. Republican lawmakers are seeking to use the CRA to reverse the nine months of interest-free forbearance and block future actions by the Department of Education.

5. How should borrowers prepare for the end of the student loan payment pause?

• Borrowers should locate their student loan servicer, contact them to update information and inquire about future payments, consider enrolling in an income-driven repayment plan, and build an emergency fund to cover the initial months of resumed student loan payments.

Proposal to End Student Loan Payment Pause Faces Uphill Battle in Congress

The U.S. House of Representatives recently voted in favor of a proposal that could potentially terminate the student loan payment pause, nullify the president’s debt cancellation plan, and compel public servants to repay forgiven debt. However, borrowers need not panic, as the proposal is unlikely to succeed. The Senate will now vote on the measure, and most Democratic lawmakers would need to support it to move forward. President Joe Biden has also pledged to veto the proposal, necessitating a two-thirds majority in both the House and Senate to override the veto. While immediate debt repayment is not imminent, borrowers should start preparing for the end of forbearance, as federal student loan payments are set to resume in early fall.

Implications of the Congressional Review Act on Student Loans:

In this case, the Congressional Review Act (CRA) serves as a tool for lawmakers to overturn final rules issued by federal agencies, such as the Department of Education. The proposal by Republican lawmakers seeks to utilize the CRA to reverse the nine months of interest-free forbearance, reinstate monthly bills, block Biden’s student debt cancellation plan, and prevent similar actions by the Education Department in the future. However, industry experts argue that such an outcome is doubtful. Mike Pierce, the executive director of the Student Borrower Protection Center, emphasized that the CRA would burden tens of millions of borrowers with bills for past-due interest charges. Nevertheless, the proposal only secured a 218-203 vote in the House, with two Democratic representatives siding with the Republican majority.

Potential Consequences and Criticisms:

The consequences of implementing the proposal would be severe for many borrowers. The nine months of forbearance invalidated by the CRA would restore the debt of over 260,000 borrowers who had already earned loan forgiveness under income-driven repayment plans and the Public Service Loan Forgiveness (PSLF) program since September 2022. This amounts to an average debt of approximately $72,000 per person, according to an analysis conducted by the American Federation of Teachers and the Student Borrower Protection Center. Additionally, the report indicates that the proposal would erase nine months of progress toward forgiveness for an additional two million borrowers enrolled in the PSLF program. Education advocates, such as AFT President Randi Weingarten, warn that this situation would create a draconian mess for borrowers.

Background and Legal Challenges:

Student loans became a contentious political issue during the pandemic. The forbearance period began in March 2020 under the Trump administration, providing relief for approximately 43.5 million federal student loan borrowers. However, this relief came with a controversial cost, estimated at around $5 billion per month in lost revenue by the Committee for a Responsible Federal Budget. In addition to the CRA, legal challenges have emerged against the payment pause. SoFi, a private student loan lender, filed a lawsuit in March arguing that the extended forbearance has resulted in significant profit losses for the company due to reduced borrower refinancing. Similarly, the conservative think tank, The Mackinac Center for Public Policy, filed a lawsuit claiming that the payment pause imposes an enormous expense on taxpayers and requested an immediate reinstatement of payments.

Preparing for the End of Forbearance:

Although the CRA proposal is unlikely to succeed, borrowers should anticipate resuming student loan payments shortly. It is essential to be prepared for this change by taking the following steps:

1. Locate your student loan servicer: Confirm the company that manages your student loans, as there may have been changes since the forbearance period began. You can find this information by logging into StudentAid.gov.
2. Contact your servicer: Log in to your servicer’s website or contact them via phone. Update your contact information and inquire about the amount you might owe when payments resume, the potential monthly bills, and available payment plans. If you had automatic payments set up before forbearance, ensure that you reinstate them. It’s worth noting that there may be a customer service backlog when prices resume, so taking proactive steps now can help you stay ahead of any potential delays.
3. Consider an income-driven repayment plan: Consult with your loan servicer to explore enrolling in an income-driven repayment (IDR) plan. These plans can significantly reduce your monthly bills by adjusting them to a percentage of your disposable income. Sometimes, your payment amount could even be as low as $0 monthly. Completing the necessary paperwork in advance will ensure that you are enrolled in an IDR plan once forbearance concludes.
4. Build an emergency fund: If possible, start setting aside the estimated amount of your student loan payment each month into a high-yield savings account. This can help you accumulate funds to cover the initial months of student loan payments when they resume. Establishing an emergency fund can mitigate any financial strain during the transition period.

Conclusion

While the proposal to end the student loan payment pause faces an uphill battle in Congress, borrowers should still prepare for the resumption of payments in the coming months. By familiarizing yourself with your loan servicer, communicating with them, considering income-driven repayment options, and building an emergency fund, you can ensure a smoother transition and effectively manage your student loan obligations. Stay informed about any updates and changes regarding student loans, as policies and regulations may evolve.

Definition of Terms

1. Student Loan Payment Pause: A temporary period during which borrowers are not required to make payments on their student loans. The government or loan servicers may implement this pause in response to unavoidable circumstances, such as economic hardship or a national emergency.
2. Congressional Review Act (CRA): A law that allows Congress to review and potentially nullify regulations issued by federal agencies. It provides lawmakers with the authority to overturn rules within a specific timeframe.
3. Forbearance: A temporary suspension or reduction of loan payments granted by a lender or loan servicer. During forbearance, interest may still accrue on the loan. For student loans, forbearance can be granted due to financial hardship, illness, or other qualifying circumstances.
4. Public Service Loan Forgiveness (PSLF): A federal program that forgives the remaining balance on eligible federal student loans for borrowers who have made 120 qualifying payments while working full-time for a qualifying employer, such as a government or non-profit organization.
5. Income-Driven Repayment (IDR) Plans: Repayment plans for federal student loans that calculate monthly payments based on the borrower’s income and family size. These plans aim to make loan payments more affordable by capping the monthly payment amount at a percentage of the borrower’s discretionary income.
6. Loan Servicer: The company or organization responsible for managing and collecting payments on a student loan. The loan servicer handles tasks such as processing payments, providing customer service, and managing loan-related paperwork.
7. Emergency Fund: Money set aside in a separate savings account to cover unexpected expenses or financial emergencies. Building an emergency fund can provide a financial safety net and help borrowers manage unexpected costs while meeting their regular financial obligations, such as student loan payments.
8. High-Yield Savings Account: A type of savings account that typically offers higher interest rates than traditional ones. A high-yield savings account allows borrowers to earn more interest on their savings, helping their funds grow faster over time.
9. StudentAid.gov: An official website operated by the U.S. Department of Education that provides information and resources related to federal student aid programs. Borrowers can access their national student loan information, find loan servicer contact details, and obtain guidance on various aspects of student loans through this website.
10. Veto: The power of the President to reject a proposed law or legislation. A presidential veto can prevent a bill from becoming law unless a two-thirds majority in both the House and Senate votes to override the veto.