Debt Ceiling Bill and Student Loan Repayments: Helping Borrowers Navigate Payment Resumption
The US is currently facing a critical financial challenge as it grapples with the debt ceiling, a legal limit on the amount of money the government can borrow to fund its operations.
The debt ceiling bill, which was passed by the House or Representatives on May 31st, 2023 and the Senate on June 1st, 2023, has many people talking about the impact on borrowers with the resumption of student loan repayments now firmly on the cards.
Understanding the Debt Ceiling
The debt ceiling is a statutory limit imposed by Congress on the amount of money the federal government can borrow to finance its activities. Once the debt reaches this predetermined limit, the government must either raise the ceiling or take measures to avoid defaulting on its financial obligations. Failure to raise the debt ceiling can have severe consequences, including a potential government shutdown, disruptions to public services, and a downgrade of the country's credit rating.
Debt Ceiling Bill and Student Loan Repayments
The COVID-19 pandemic brought about temporary relief measures for student loan borrowers, including a suspension of loan payments and interest accruals. However, these measures were temporary and with the passing of the debt ceiling bill, they are scheduled to expire soon.
Consequences for Student Loan Borrowers
Many borrowers have been relying on the temporary relief measures to manage their financial obligations during the pandemic and the lingering fall-out from it. With the bill having been passed in the Senate, payments will now resume for student loans on August 30th 2023. This comes after 3 years of paused payments, so borrowers are going to have to quickly readjust their budgets to avoid defaulting on their loans- something which may cause some difficulty.
In addition, the resumption of interest accruals on student loans could cause loan balances to rise, increasing the overall debt burden for borrowers. For individuals who continue to experience financial hardship following the pandemic or those who were unable to make progress in reducing their loan balances during the suspension period, this will be particularly challenging. The pressure of ensuring that you do not default on your repayments may be even higher for those who participated in the Fresh Start program since they would stand to lose the benefits of that program too (see details).
How Payitoff Can Help Your Borrowers and Customers Through Resumption
If you are concerned about how to help your customers or employees deal with the impact of payment resumption and mitigate the risk of defaults, consider Payitoff - a leading provider of embeddable debt management tools designed to improve business outcomes for their partners and financial outcomes for their partners' customers. Historically, Payitoff's tools have saved student loan borrowers an average of $240 per month on their federal monthly student loan payments.
