40 Million Student Loan Borrowers Could Get Hit With Past Due Balances Plus Interest Soon

Veronica Charnell Media

Photo courtesy of NBC NEWS/Student Loan ForgivenessPhoto byNBC News

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 earlier this week.

The bill called the Congressional Review Act (CRA) was passed by a 218-203 vote, with at least two Democratic representatives showing their support for this bill. It would require the Department of Education to reverse months of forbearance since September 2022 and waive interest charges that were part of the federal response to the Covid-19 pandemic. On top of that, It would also prevent the implementation of President Biden’s up to $20,000 cancellation of student debt even if the Supreme Court rules in favor of the legality of the program.

The measure, which the president has vowed to veto if it passes the Senate, would leave approximately 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.

For example, Eden Iscil, public policy manager at National Consumers League said, “Those individuals whose loans were discharged under longstanding forgiveness programs, such as Public Service Loan Forgiveness, could see their debts reinstated,". "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.

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“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.”

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