The debt ceiling deal finalized between President Joe Biden and House Speaker Kevin McCarthy on Sunday would reinstate student loan payments and the accrual of interest in late August.
"The pause is gone within 60 days of this being signed," McCarthy told Fox News anchor Shannon Bream. "So that is another victory because that brings in $5 billion each month to the American public."
The Biden-McCarthy deal would suspend the debt limit until January 2025. The plan now heads to Congress for a vote.
Are student loans still deferred?
Yes. Student payments and interest have been on pause since the onset of the pandemic, a moratorium first adopted and extended under former President Donald Trump and then extended again under Biden.
But that won’t be the case for long. The Biden administration, whose mass student debt forgiveness plan is currently held up in the Supreme Court, has faced mounting pressure to lift the moratorium.
Even before Sunday’s deal, efforts were underway to bring student loan payments back.
A bill that passed out of the House last Wednesday would end the payments as well as Biden’s broader plan to relieve up to $20,000 in student loan debt for Americans with individual incomes of less than $125,000.
Before that, in March, the student loan refinancing company SoFi sued the federal government over the pause, seeking to end it.
Education Department Prepares for Return to student loan payments
Education Secretary Miguel Cardona has stressed the moratorium has an expiration date.
In a Senate Appropriations Committee hearing in May, the secretary said borrowers should prepare to start making payments again no later than 60 days after June 30 or after the Supreme Court issues its decision on the two cases challenging Biden’s broad relief plan.
"The emergency period is over, and we’re preparing our borrowers to restart," Cardona said in the hearing.
But as reported by Politico, internal Education Department documents indicate it could be until October at the earliest that the process resumes. According to the documents, department officials anticipate needing several months to transition back into payments.
BIDEN'S STUDENT LOAN FORGIVENESS PLAN:Lawsuit filed to end student loan payment pause
President Joe Biden on Sunday announced a debt ceiling deal he said would avoid a "catastrophic default" by the federal government while keeping the economy fluid.
"It takes the threat of catastrophic default off the table," Biden said in a brief statement about the bipartisan agreement, which would still need approval from both chambers of Congress.
Biden expressed relief that the debt ceiling would not be in play for budget negotiations between Democrats and Republicans for two years.
"I strongly urge both chambers to pass that agreement," he said. "Let's keep moving forward."
Biden said he had just spoken to House Speaker Kevin McCarthy, who earlier Sunday had expressed confidence that their debt ceiling deal would pass Congress, despite early criticism from some lawmakers.
McCarthy, R-Calif., said at a news conference that he expects that over 95% of House Republicans will support the 99-page bill, the language of which he released Sunday evening.
He said in a statement the deal would stop "out-of-control" spending by Biden as it "forces the Executive Branch to find dollar-for-dollar savings in the government for costly rules and regulations so that executive overreach is reined in and held accountable."
The House plans to take up the bill Wednesday after markets close, Republican senators were told.
“This is going to be transformational, where Congress is literally going to vote to spend less money this year than we spent last year,” McCarthy said earlier.
Asked by reporters Sunday in Washington whether he’s confident the deal will get to his desk, Biden said: “Yes.”
In a statement, Senate Minority Leader Mitch McConnell, R-Kentucky, urged colleagues to quickly pass the legislation underpinning the deal.
"The Senate must act swiftly and pass this agreement without unnecessary delay," he said, expressing gratitude to McCarthy for helping to rein in government spending via the agreement.
Negotiators struck an agreement in principle Saturday night to extend the debt ceiling. The text of the bill will be prepared by Republicans and reviewed by the Biden administration before it is finalized, House Minority Leader Hakeem Jeffries, D-N.Y., wrote Sunday in a letter to Democrats.
Jeffries told his caucus that shortly after Biden and McCarthy spoke to complete the agreement, Republicans would release the bill.
The tentative agreement, which is expected to raise the country's borrowing authority in exchange for cuts in spending, was struck after weeks of negotiations led by Biden and McCarthy.
A source familiar with the agreement said it includes a two-year appropriations deal and a two-year extension of the debt limit, effectively resolving the issue until after the 2024 election. It will include work requirements to receive federal aid under the Supplemental Nutrition Assistance Program, or SNAP, for people up to 54 years old, with exceptions for homeless people and veterans. But there will be “no changes to Medicaid,” the source said.
Some lawmakers on both sides of the aisle criticized the deal on Sunday programs.
Rep. Pramila Jayapal, D-Wash., the chair of the Congressional Progressive Caucus, said Democratic leaders should be worried about progressive support for the deal on CNN’s “State of the Union."
Jayapal, who had been briefed on the agreement, criticized the provision that would tighten work requirements for the SNAP food assistance program, calling it a "bad policy."
“It is really unfortunate that the president opened the door to this, and while at the end of the day, you know, perhaps this will — because of the exemptions — perhaps it will be OK, I can’t commit to that. I really don’t know,” Jayapal said.
Rep. Jim Himes, D-Conn., said the deal lacks Democratic priorities. Still, he said it may get some support from Democrats because it’s a “very small bill.”
“Had the bill looked anything like what the Republicans passed on the floor where they rescinded all the money designed to create an electric battery industry in this country, designed to further reduce drug prices, you would have had unanimity against it,” Himes said on “Fox News Sunday.”
Some Republicans swiftly disputed McCarthy’s claim that a majority of the conference was “very excited” about the deal.
Sen. Lindsey Graham, R-S.C., took issue with the defense spending proposals, saying it would be a “joke” to adopt what he characterized as Biden’s defense budget.
“I want to raise the debt ceiling. It would be irresponsible not to do it,” Graham said on “Fox News Sunday.” “I want to control spending. I’d like to have a smaller IRS. I’d like to claw back the unused Covid money. And I know you can’t get to perfect, but what I will not do is adopt the Biden defense budget and call it a success.”
And Rep. Chip Roy, R-Texas, called the bill a “turd-sandwich” in a tweet.
Two GOP negotiators, Reps. Garret Graves of Louisiana and Patrick McHenry of North Carolina, defended the deal Sunday afternoon.
“A lot of the things people have been saying or alleging, they’re just not accurate,” Graves said. “I’m confident once the text gets out people are going to recognize that, you know, we’re actually in a pretty good spot.”
Graves and McHenry explained the discrepancies between White House and Republican spending estimates, saying the bill would roll back discretionary spending to levels from fiscal year 2022 — which was in the GOP bill the House passed weeks ago. They also said they aren’t counting $121 billion in funding for the Department of Veterans Affairs, as the White House is.
Once the legislative language is finalized, it will have to pass both the GOP-led House and the Democratic-controlled Senate.
In a letter to Senate Democrats on Sunday, Senate Majority Leader Chuck Schumer, D-N.Y., said senators should prepare for potential votes Friday and next weekend.
Meanwhile, McCarthy said that he has already spoken to McConnell and that he will soon brief Senate Republicans on a conference call.
White House officials will hold separate briefings with House Democrats and Senate Democrats on Sunday evening, a source familiar with the plans said. Both briefings will be conducted by Shalanda Young, the director of the White House Office of Management and Budget; John Podesta, Biden’s senior adviser on clean energy; and Aviva Aron-Dine, the deputy director of the National Economic Council, two Democratic sources said.
House Republicans called the agreement "The Fiscal Responsibility Act" in a memo circulated to members Saturday night. “Republicans will restore fiscal sanity and hold Washington accountable,” the memo read.
Last week, Treasury Secretary Janet Yellen extended the deadline to act or risk breaching the debt ceiling to June 5. She had previously been less specific, saying the U.S. could run out of money “potentially as early as June 1.”
The Treasury Department hit the statutory borrowing limit in January and has been using “extraordinary measures” to pay the country’s bills.