WASHINGTON D.C., UNITED STATES – FEBRUARY 7: House Speaker Kevin McCarthy (R-CA) is seen before the … [+]
House Republicans are calling for an end to President Biden’s sweeping student debt relief initiatives, specifically widespread student loan forgiveness and the ongoing student loan pause.
Republicans won a narrow majority in the House of Representatives following the midterm elections, and GOP members are calling for significant budget cuts to federal programs in exchange for raising the debt ceiling limit.
Here’s what borrowers should know.
Biden announced his unprecedented, wide-scale student loan debt relief initiative last fall. Under his proposal, millions of federal student loan borrowers could receive up to $20,000 in student loan forgiveness on their government-held federal loans. But federal courts blocked the initiative in response to two legal challenges brought by a coalition of Republican-led states and a conservative-leaning organization. Later this month, the Supreme Court will hear appeals from the Biden administration.
Meanwhile, the ongoing student loan pause will reach its three-year anniversary next month. Initially contemplated as a six-month pause on student loan payments, interest, and collections in response to the Covid-19 pandemic, President Trump and then President Biden issued over half-a-dozen short-term extensions of the relief. Biden issued his most recent extension in response to the legal challenges seeking to block his student loan forgiveness initiative. The payment pause is currently set to end 60 days after either June 30, 2023, or whenever the Supreme Court issues its decision on the debt relief program.
Republicans want to use their newly-empowered (albeit narrow) majority in the House of Representatives to force the Biden administration to make significant cuts to federal spending as part of any agreement to raise the debt limit — a borrowing limit that Congress must periodically reauthorize. Notably, the debt limit pertains to debts already incurred by the government, not new spending or future debt.
The House Budget Committee outlined several areas where it would be seeking cuts to Biden administration programs in a press release on Wednesday. And student loan relief programs are on the list.
“We must ‘reverse the curse’ of deepening deficits and debt by addressing the underlying reason that we are having to raise the debt ceiling to begin with: uncontrolled federal spending,” wrote the committee in its release.
“President Biden’s student loan bailout is not only costly and misguided, but recent studies have also shown that it disproportionally benefits the top 10% of income earners. Ending these bailouts would save hundreds of billions of dollars: $25 billion from ending his loan repayment moratorium and $379 billion from prohibiting the debt cancellation all together.”
The Biden administration has maintained that 90% of student loan forgiveness relief would go to those earning less than $75,000 a year.
The committee’s recommendation seems to focus specifically on the student loan pause and Biden’s one-time student loan forgiveness initiative. It does not appear to reference other Biden administration initiatives such as the Limited PSLF Waiver for public service borrowers, the new IDR Account Adjustment initiative, or the newly-announced income-driven repayment plan overhaul. However, House Republicans have been critical of these programs, as well.
House Republicans would not be able to unilaterally enact changes to federal student loan initiatives, as any new legislation would need to be passed by the Senate as well (which retains a narrow Democratic majority) and signed by President Biden. However, Republicans hope that control of the House will provide them with signifiant leverage to extract concessions from the Biden administration in exchange for raising the debt limit. President Biden has maintained that he will not negotiate over the debt limit for spending that both Democrats and Republicans in Congress had previously authorized.
The federal spending showdown will likely continue to this summer, which is when experts anticipate that the federal government will start running out of options to avoid breaching the debt limit. The summer will also be a critical point for student loan borrowers, as a Supreme Court decision on Biden’s student loan forgiveness plan is expected to be issued in June, and the current student loan pause extension ends June 30.
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