This week, President Joe Biden and House Speaker Kevin McCarthy finalized the debt ceiling deal to prevent the U.S. from defaulting on its debts. While it hasn't officially been signed yet, it will go to a vote in Congress ahead of the June 5 deadline.
Part of that deal includes ending the student loan moratorium -- which was first instated in 2020 during the early stages of the pandemic and has been extended multiple times since.
The end of the moratorium means millions of borrowers will have to begin making payments again for the first time in over three years. But the student loan situation is still complex and confusing, especially with loan forgiveness still up in the air. Here's what you need to know right now.
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1. Payments could resume as early as August
Under the debt ceiling deal, payments are set to resume within 60 days after either a Supreme Court ruling on debt forgiveness, or June 30 (whichever is first).
However, Education Department documents obtained by POLITICO reveal that it could take until October for payments to officially resume, as officials may need months to prepare. The documents also noted that borrowers will receive a billing statement at least 21 days ahead of their payment due date.
POLITICO also reports that there will likely be some type of grace period in the early stages after payments are reinstated, in which borrowers will not be penalized for late payments.
The debt ceiling agreement also still allows the Education Department to pause student loan payments in the future in the event of an emergency.
2. Loan forgiveness isn't necessarily off the table
The end of the moratorium also complicates the Biden administration's student loan forgiveness plan.
The loan forgiveness program -- which would cancel up to $20,000 in federal student loans per borrower -- was spared in the debt ceiling deal, much to the dismay of many Republicans. But it still faces legal challenges, and its future will hinge on an upcoming decision from the Supreme Court.
President Biden and many progressives are pushing for debt cancellation ahead of resuming payments, especially as inflation remains high and many borrowers are already struggling financially. Conservatives, however, largely oppose loan forgiveness.
The American public is also divided over the topic. Around 47% of Americans support Biden's forgiveness plan, while 41% oppose it and 12% are undecided, according to a poll from USA TODAY.
The Supreme Court is expected to make a decision in the coming weeks about the program. Until then, it's still uncertain whether borrowers can expect loan forgiveness or not.
What can you do to prepare?
Student loans, in general, are still murky, and little is set in stone right now -- especially regarding the loan forgiveness plan.
For now, it's wise to start planning on making payments on any outstanding student loan debt starting in August. Things could change if the Supreme Court decides in favor of the Biden administration's debt cancellation plan, but for now, it may be best to avoid banking on loan forgiveness.
Student loans can be complicated, and the debt ceiling agreement has many wondering what's in store for the future. For right now, it may be smart to begin preparing your budget for loan payments again -- while still keeping an eye on the Supreme Court's upcoming decision.
