Student Loan Cancellation Update: How GOP Bill Changes Forgiveness

House Republicans passed its bill raising the nation's debt ceiling this week and the measure, if successful, would directly impact tens of millions of Americans who were promised their student loans would be forgiven.

The legislation would scrap two significant measures in President Joe Biden's student loan forgiveness plan: the one-time debt cancellations for more than 40 million Americans and an updated repayment option that would have cut monthly bills in half.

The 320-page bill passed by the narrow Republican majority would raise the nation's $31.4 trillion debt limit through March 31, 2024, or until the debt increases by $1.5 trillion. However, the legislation will be dead on arrival in the Democratic-led Senate, according to Senate Majority Leader Chuck Schumer.

"These measures, and they're truly extreme, have no place in a debate about avoiding default," Schumer said during his Wednesday speech on the Senate floor. "I urge Speaker [Kevin] McCarthy to stop wasting any more time on this DOA, dead on arrival bill. Time is running out for Congress to work together to avoid catastrophe."

Biden last met face-to-face with McCarthy on the debt limit in early February. Following that encounter, McCarthy left the White House telling reporters it was "a good first meeting." However, the two have not met face-to-face since, with the president recently expressing that he has no interest in negotiating on the issue.

Nonetheless, it's a starting point for negotiations with the White House, which will need to find a way to raise the debt ceiling before the default deadline that could come as soon as this summer.

The GOP measure takes a hit at a number of Biden's tax policies and his sweeping student loan forgiveness plan, with Republicans saying their proposal is a victory for taxpayers. Lawmakers on both sides of the aisle agree that the existing student loan system is problematic, but have different approaches to solving the issue.

"There's no question in my mind that something has to be done about the massive student loan crisis that impacts millions of Americans, particularly younger Americans," tax expert and American University professor Caroline Bruckner told Newsweek on Friday.

Although 15 percent of American adults have student loan debt, that number nearly doubles to 29 percent when considering Americans aged 25 to 35, U.S. Census data from 2017 shows. Black Americans and never-married adults are also found to be more likely to have outstanding college debt.

Biden announced his $430 billion student relief plan last summer, delivering on his 2020 campaign promise to forgive up to $10,000 in student loans per borrower and as much as $20,000 for borrowers who received a federal Pell Grant to fund their college tuition.

Biden's Department of Education (DOE) is also working to create a new repayment plan for borrowers on an income-driven plan. The updated option, the Revised Pay As You Earn Payment (REPAYE Plan), makes it so that instead of paying 10 percent of discretionary income per month, borrowers would only be required to pay 5 percent to those loans, the Associated Press reported.

The Biden administration has estimated that if all borrowers claim the relief they are entitled to, the plan would provide relief for up to 43 million Americans and that roughly 20 million borrowers would have their full remaining balance cancelled.

However, under the GOP bill, all of these relief measures would be tossed out. It would also bar the DOE from ever issuing regulation that would raise costs for the federal student loan program—a move that the department estimates would slash 22 percent of its budget across programs, according to the AP.

Speaking on the House floor on Wednesday, Representative Virginia Foxx, a North Carolina Republican, called Biden's loan forgiveness plan a "backdoor" attempt to provide free college on "the backs of blue-collar Americans."

Biden has called Republican pushback on his plan "simply wrong" and "hypocritical."

"I don't want to hear it from MAGA Republican officials who sit in Congress and who had hundreds of thousands of dollars—in one case, a million—over a million dollars in pandemic relief loans forgiven," he said during remarks from Albuquerque, New Mexico, on November 3. "Despite what Republican officials say, we can afford this student loan program."

Biden's plan is currently being challenged in the Supreme Court by a number of GOP-led states, who argue his policies are an overreach. The justices are not expected to rule until late June, leaving borrowers unsure as to when payments will begin again.

The White House has said that payments will pick up again 60 days after the litigation is resolved, but that if the administration is still defending the policy by the end of June, the payments will not pick up until the end of August.