- The Education Department finalized a three-month grace period after payments resume, per Politico.
- It’s intended to help borrowers who might miss payments after the resumption in October.
- The Supreme Court will issue a decision on Biden’s broad debt relief plan on Friday.
President Joe Biden’s Education Department is moving ahead with its plans to give student-loan borrowers a smooth transition back into repayment this fall.
On Thursday, Politico first reported that the department in recent weeks has finalized its plan to implement a three-month grace period after payments resume in October for any missed payments. This is something the department had been working on as early as 2021, known as the “safety net period,” in which borrowers who fall behind on payments within the first 90 days of repayment would immediately be placed on forbearance and would not experience negative credit reporting.
The Biden administration has reiterated that payments are scheduled to resume again in October after a more-than-three-year pause, and interest will begin accruing again on borrowers’ loans in September. And another extension is not in the cards, as the debt-ceiling bill that Biden recently signed into law codified the end of the payment pause. While it left the door open for another extension in the event of another national emergency, the president cannot implement further relief in connection with COVID-19.
In addition to the grace period, Politico also reported that the Education Department will unveil its new income-driven repayment plan in the coming weeks, with implementation soon after. The plan — introduced in detail alongside Biden’s August announcement of up to $20,000 in broad student-debt relief — would cut undergraduate monthly payments in half, which the department recently coined as “the most affordable repayment plan ever.”
The Education Department did not immediately respond to Insider’s request for comment on its forthcoming plans.
In light of the new report, though, top Republican on the House education committee Virginia Foxx said in a statement that the debt-ceiling bill “was clear that the Department needed to restart the repayment of federal student loans. This deferment proposal is not that.”
She continued: “The Department has had over two years to prepare for restart yet done everything it can to avoid doing so, instead spending its time and energy on illegal and blatantly political forgiveness schemes. This administration needs to obey the law and give clarity to borrowers and servicers.”
Foxx joined Sen. Bill Cassidy, top Republican on the Senate education committee, on Wednesday in sending a letter to Education Secretary Miguel Cardona asking for “tangible proof” on its strategy to resume repayment.
Amid the repayment debate, the most pressing issue for borrowers right now is whether the Supreme Court will uphold Biden’s broad student-loan forgiveness. The high court will issue its decision on the relief on Friday, the last day of its term — and Democratic lawmakers want to ensure that whatever the justices decide, borrowers will get relief one way or another.
“We are prepared in the event of any outcome in this ruling,” Democratic Rep. Alexandria Ocasio-Cortez previously said. “We are here to fight, and we are here to make sure, and encourage, and have the president’s back, in making sure that this cancellation goes through for the millions of people in the United States.”
