PAY UP — Millions of Americans are now facing the possible resumption of student loan payments on Aug. 30 — for the first time since the outset of the pandemic — as a result of the debt limit deal cut between President Joe Biden and House Speaker Kevin McCarthy. Biden’s original student debt relief plan — which would offer up to $20,000 in forgiveness — is at risk as well. The Supreme Court is set to decide the legality of the plan and House Republicans are taking up legislation to repeal the program. If the administration can’t successfully navigate potential challenges to the plan by August, the goodwill that Biden engendered with younger voters suffering from substantial amounts of debt could evaporate. And Americans who have relied on the payment pause to pay their other bills could come under intense financial stress. Nightly spoke with Michael Stratford, an education reporter at POLITICO, on how student loan forgiveness ended up in the debt limit deal and how the Biden administration will deal with the fallout. How did student loan forgiveness become a bargaining chip in the debt limit negotiations? Conservatives have made it a priority to stop Biden’s student debt relief plan, which they say is costly for taxpayers, an illegal abuse of power, and unfair to Americans who didn’t attend college or already paid off their loans. The initial House GOP debt ceiling plan included provisions that would have blocked an even broader array of Biden’s student loan policies. In addition to overturning the program to cancel up to $20,000 of student debt, the House-passed bill would’ve blocked the pause on student loan payments, nullified a new income-driven repayment plan aimed at lowering monthly payments and permanently curtailed the Education Department’s power to make changes to the student loan programs. The White House fended off efforts to rollback most of those policies during the negotiations. But as part of the final compromise deal, the Biden administration agreed to language that winds down the pause on student loan payments and interest. Several members of the House Freedom Caucus who are opposed to the debt deal today cited student debt relief as one of the many areas where the bill doesn’t go far enough in achieving conservative priorities. Rep. Scott Perry (R-Pa.), chair of the caucus, blasted the fact that the “student loan bailout” was left intact under the deal. “Biden forgives, you pay,” he said. “None of that changes.” The deal “upholds Joe Biden’s student loan transfer scheme,” said Rep. Andrew Clyde (R-Ga.). What legal challenges are currently affecting Biden’s debt cancellation plan? How might the Biden administration respond to Supreme Court rulings on debt cancellation in light of payments now beginning again later this summer? The Supreme Court heard arguments earlier this year in two cases brought by Republican attorneys general and a conservative group that challenged the legality of student debt cancellation. The conservative majority on the court appears skeptical of allowing Biden’s plan to move ahead, and the justices are expected to issue their ruling in the coming weeks. The prohibition on further extensions of the payment pause potentially takes away one of Biden’s tools for responding to a possible loss at the Supreme Court. The Education Department wouldn’t be able to again delay payments and interest if its debt cancellation plan gets rejected. House Speaker Kevin McCarthy over the weekend said that was precisely what the language was designed to do. The administration already had plans to end the payment pause later this year. How does this outcome differ? That’s right, the Biden administration had already been planning to restart payments at the end of the summer. Education Secretary Miguel Cardona confirmed those plans as recently as earlier this month when he testified to Congress. White House officials have therefore portrayed this provision as merely codifying into law what the administration was already planning to do. It’s true that this was the stated plan all along. But, of course, cementing something into law is different than announcing it in a press release. The administration on several previous occasions announced that the payment pause was ending, only to reverse course at the last minute and give borrowers another reprieve. Many progressives and student debt activists were holding out hope that the administration would be able to further extend the payment pause if the Supreme Court strikes down the debt cancellation plan. The Education Department had taken some steps internally toward preparing to resume collecting loans, such as developing an initial grace period in which borrowers aren’t penalized for missing payments as they receive student loan bills for the first time in more than three years. But the administration had not yet begun actively reaching out to tell borrowers that their payments were resuming. How do you see this outcome affecting Biden, given that student debt relief was a major plank of his presidency? If this debt ceiling deal becomes law — and the repayment deadline is set in stone — the political challenge for Biden begins. The administration is going to have to figure out how to prepare millions of borrowers, many of whom are part of Biden’s base, to resume paying on student loans that they are expecting to have partially or fully forgiven. It raises the pressure on the White House to come up with a Plan B for student debt cancellation that it has repeatedly insisted it is not developing. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at klong@politico.com or on Twitter at @katherinealong.
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