How the Debt Ceiling Deal Impacts Student Loan Borrowers

We Did It, Joe!

As I write this, the debt ceiling deal is headed to President Biden’s desk. He has already said that he will sign it— so, it looks like we have a new debt limit. No default. Phew.

This deal will suspend the debt limit for two-ish years, until January 1st, 2025. So that is good news for the debt ceiling and tough news for anyone hoping to win the presidential ticket in 2024. Along with the Oval Office, they will inherit a multi-trillion dollar problem.

But until then, the people who will be impacted most from the new rules are people who have student loan debt, who are on food assistance programs, or people who love the environment and/or live in Virginia. If you fall under one of these categories, you will be affected by the proposed debt deal. But no sweat, I’ll walk you through it.

Student Debt

So, as of right now, student loan repayment requirements are paused and interest is not accumulating on any outstanding debt. This new debt deal will press play on payment requirements and allow interest to once again snowball. Under the deal, borrowers will need to start making payments again by the end of August.

But, to be honest, this doesn’t change much for people with student debt. The biggest change, of course, would have been some wide-sweeping debt forgiveness. In debt ceiling negotiations, Republicans were keen on slashing any student debt relief - but, those decisions were punted to the Supreme Court.

Biden’s debt relief plan is on the Supreme Court docket for this summer. And the game plan, even before the debt ceiling negotiations started, was for student debt repayments to resume 60 days after the lawsuit in the Supreme Court is resolved, or, if not resolved by June 30th, 60 days after that.

… In other words, the end of August: same-same as what is written into the current debt deal proposal. So, again, even though this debt deal would officially resume student loan payments, it actually doesn’t change much from what was already decided. And for everything else, the arena where big student loan change will be decided is the Supreme Court.

Mama Earth

This debt deal is not good news for the progress that climate activists have been making over the last few years. The big consequence of the debt deal where the planet is concerned, is that this agreement would freeze spending for the Environmental Protection Agency - which is the federal agency that protects people and the environment from health risks, and enforces environmental regulations. Beyond that, Biden made a really big concession to Republicans and agreed to expedite permitting for the Mountain Valley Pipeline, a 303-mile gas pipeline that will run through the Blue Ridge and Appalachian regions of Virginia and West Virginia, all the way to North Carolina. Construction of the pipeline has been stalled with dozens of environmental violations, but Biden gave a yellowish-green light in the debt deal.

Pro-pipeline voices say the main benefits of the project will be jobs created to construct and maintain the pipeline, and local residents will have better gas service. The anti-pipeline peeps say that this pipeline will hurt regional clean water and endangered species, as well as increase dependence on gas. It’s a tale as old as time: new jobs versus quality of life, and I think we’re all ready for a world in which there’s an emphasis on new green jobs that can actually help our quality of life.

Food Assistance

More than 42 million people were enrolled in Supplemental Nutrition Assistance Program benefits (also known as “SNAP benefits” or food stamps) at the top of this year. That’s a lot of people that depend on these benefits to put food on the table for their families. And, to cut to the chase: the debt deal would trim SNAP spending overall, but expand access to the program for some groups.

There are three big changes to SNAP that are in the proposed debt deal, and heads-up, there’s some jargon here, but I’ll break it down:

1) Raising the age of food stamp recipients subject to work reporting time limit requirements from 50 to 54, but only until 2030

2) Placing new restrictions on how often states can waive work requirements for food stamp recipients

3) Requiring the Agriculture Department to publish a report of which state waivers it approves and rejects

Again, that’s a lot of jargon. Let’s unpack this. So, in order to qualify for SNAP, generally, your household income needs to be at or below 130% of the poverty line. For a three-person family, for example, you are eligible for SNAP benefits if your household income is a little under $30,000 a year.

In order to get SNAP benefits, if you are able to work, you will need to meet the general work requirements. And these requirements are basically that you need to be trying to work, or get a job. There are some exceptions, but that’s generally the prerequisite.

But, if you are between the ages of 18 and 49, you may also need to work at least 80 hours a month in order to be eligible - and that definition of “work” is pretty flexible; it can be 80 hours of paid or unpaid work, or even volunteering or going through a federal training program.

The new debt ceiling agreement basically raises the age where you can stop reporting those 80 hours of work in order to get SNAP. As of right now, if you’re able to work, you probably don’t need to report those 80 hours of work if you’re over 50… but under the new deal, you would need to report those hours until you’re 54.

The second and third changes will make the biggest difference to SNAP: restricting when states can waive work requirements, and requiring more reporting around when states have waived these requirements. Most Democrats are looking at this as an effort to weed out more people who can claim SNAP benefits, and therefore, cut SNAP spending.

There is one last important change when it comes to food assistance: this debt deal actually expands SNAP access for veterans, unhoused people and young adults transitioning out of the foster care system. So, net-net, the SNAP point of the debt deal tells a pretty decent story of cooperation and compromise from both sides of the aisle.

xo,

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