Student loans: House votes to claw back pandemic forbearance and debt relief
The US House of Representatives voted in favor of a bill that would claw back paused student loan payments and block the president's student debt forgiveness program.
The bill called the Congressional Review Act (CRA) was passed by a 218-203 vote, with at least two Democratic representatives appearing to support the measure.
It would require the Education Department to reverse months of forbearance since September 2022 and waived interest charges that was part of the federal response to the Covid-19 pandemic. It would also prevent the implementation of President Joe Biden’s up to $20,000 cancellation of student debt — regardless of how the Supreme Court rules on the legality of the program.
The measure, which the president has vowed to veto if it passes the Senate, would leave 40 million student loan borrowers with past-due balances on their loans plus new interest charges.
“Voting in favor of CRA is really a pretty extraordinary slap in the face to representatives' constituents,” Abby Shafroth, a senior attorney with the National Consumer Law Center, told Yahoo Finance. “It would not only break a promise the government has already made to constituents to provide them life-changing debt relief, but also increase their student loan balances right now by undoing past months of 0% interest and retroactively charging interest for that time.”
Other advocates worry that the resolution would reinstate debt for borrowers who received debt cancellation under the public service loan forgiveness (PSLF) program.
“Many individuals whose loans were discharged under longstanding forgiveness programs, such as Public Service Loan Forgiveness, could see their debts reinstated," Eden Iscil, public policy manager at National Consumers League, told Yahoo Finance. "This would all be in addition to the dangers of restarting monthly payments during high inflation and without the president’s debt cancellation.”
The American Federation of Teachers (AFT) and the Student Borrower Protection Center (SBPC) released a new report Tuesday showing the CRA resolution would cause far greater harm to public service workers with student debt.
“The CRA would impact PSLF, block Biden’s student loan cancellation, and will roll back debt relief already delivered,” Mike Pierce, executive director of the Student Borrowers Protection Center, said in a press conference. “It would strike down an existing set of programs having an immediate impact on borrowers by invalidating student loan policies since 2022.”
Around 268,660 public service workers who received debt cancellation from September 2022 through March 2023 through the public service loan forgiveness program would have $19.5 billion in debt put back in place as a result of the CRA, according to the AFT/SBPC report.
On the other end, the Committee for a Responsible Federal Budget estimated that if the measure passed, it would reduce deficits by $316 billion through 2033. The public policy nonprofit instead said the administration should "find a bipartisan path forward that truly reforms the system," CRFB President Maya MacGuineas said in a statement.
The back and forth between supporters and critics is mostly moot.
"It is unlikely that the bill would pass in the Senate or survive a presidential veto,” Mark Kantrowitz, author and student loans expert, told Yahoo Finance.
The White House reiterated that stance on Wednesday in a press briefing before the House vote.
“And know this: President Biden won’t stand for it," White House Press Secretary Karen Pierre said. "He will veto this bill.”
Ronda is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda.
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