As part of the debt ceiling deal between House Speaker Kevin McCarthy and President Joe Biden, a pause on student loan repayments that has been in place since the Covid-19 pandemic will be terminated after August 30. Around 43 million Americans who were allowed to suspend payments on their federal loans will have to resume them as of September 1. That could result in a hit to borrowers’ spending power — and, as a result, a blow to the economy. Joseph Brusuelas, chief economist for RSM US, estimates that resuming these student loan payments could lead to a $40 billion decrease in household disposable income. A Credit Karma survey from March and April found that of 1,006 people with student loans, “43% of borrowers do not feel financially stable and 21% had no savings.”
On a related note, the Senate on Thursday passed a bill to block Biden’s student loan forgiveness program, which would cancel up to $20,000 in debt for borrowers. The House had previously passed the bill, which will now head to Biden’s desk. The president has said he will veto it. The Supreme Court is also expected to rule on the constitutionality of Biden’s plan later this summer.