Biden promised student-loan borrowers cheaper payments and more debt relief. The government might not have enough money for everyone to actually get those benefits.

Insider

Ayelet Sheffey

May 13, 2023

With broad student-debt relief, many student-loan borrowers anticipate reforms to payment programs.

But whether those reforms can even be set in motion depends on a key thing: more funding.

Congress didn’t increase funding for Federal Student Aid last year, and the impacts already show.

When it comes to government programs, money really does make the world go round.

Federal student-loan borrowers are facing a consequential year ahead. By the end of June, the Supreme Court is expected to issue a final decision on whether President Joe Biden’s plan to cancel up to $20,000 in student debt for federal borrowers making under $125,000 a year is legal. The implementation of that relief has been paused since November due to two conservative-backed lawsuits, and the fate of the broad relief has remained in limbo.

But the broad relief is not the only thing at stake. Student-loan payments are expected to resume 60 days after June 30 or 60 days after the Supreme Court issues its decision, whichever happens first, meaning millions of borrowers will be resuming payments after an over-three-year pandemic pause — regardless of whether they get the loan forgiveness.

And along with a payment resumption, the Education Department has announced a host of plans to make the transition easier for borrowers by creating “the most affordable repayment plan ever” and implementing permanent reforms to targeted debt-relief programs, like Public Service Loan Forgiveness. Those changes are part of the department’s broader plan to overhaul student-loan servicing and make it work better for borrowers — but whether any of those things can effectively happen largely depends on whether Congress gives Federal Student Aid enough money.

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