Breaking News
More () »

Debt ceiling deal may impact 1M+ student loan borrowers in MI

The deal includes an end to the 3-year pause on federal student loan payments, potentially impacting more than 1.4 million Michiganders who are paying them back.

GRAND RAPIDS, Mich. — House Speaker Kevin McCarthy and President Joe Biden reached a deal over the weekend to raise the nation's debt ceiling until 2025, avoiding a potentially catastrophic default in exchange for federal spending cuts and other economic priorities for the GOP.

"After weeks of negotiations, we have come to an agreement in principle," Speaker McCarthy (R-Calif.) said over the weekend. "We still have a lot of work to do, but I believe this an agreement in principle that's worthy of the American people."

One major concession from the White House: the restart of payments on federal student loans later this summer. The payments had been paused since the start of the pandemic.

"Most borrowers are going to have to work hard to fit this into their budget, the average borrower owes $400 a month," said Michelle Miller-Adams, a senior researcher at the Upjohn Institute for Employment Research. "And to have that just kind of pop up is going to be hard to accommodate."

Scheduled for sixty days after June 30, the potential restart looms over more than 1.4 million borrowers in Michigan — including at Grand Valley State University, where Miller-Adams teaches as a political science professor.

"This age group is also at the age where they are really establishing credit, and many of them may not have credit, a credit history, and your student loan payments are an important part of that," Miller-Adams said. "So not, you know, just ignoring that is a very good idea down the road, if you want to get a car loan or mortgage or things like that."

Just over half of all GVSU undergraduates were receiving federal student loans during the 2020-2021 school year.

Mary Dupuis, who recently graduated from GVSU, says she's one of them.

While she says she's in the midst of a six-month grace period given to graduates on their loans, she fears how she'll be able to make payments now that they could resume.

"It definitely makes me feel just very nervous," Dupuis said. "I know that it's a commitment, and I know that I'll stick to it, but how exactly that'll happen is definitely kind of up in the air right now."

However, the timeline for the end of the pause, Miller-Adams said, could spell some good news for borrowers.

"It's not a very long window, this 60-day window, but it does give borrowers time to reach out to their student loan servicers to track down that information about where their loans currently are to try to reach somebody on the phone if they need help," Miller-Adams said.

One local financial expert explained what can be done in that time by those with student debt to prepare.

"You may want to cut back on one of your savings areas temporarily while you get this back into your budget," EFG Financial Owner and Fiduciary Advisor Kelly Gilbert said. "And remember that in your savings area, number one is your emergency fund. Number two is your retirement savings. Make sure that you start at the number two and then work your way up to number one; you always want to have those emergency savings on hand."

With just days to go before the U.S. could default, Michigan borrowers may soon have to face a new economic reality not felt in years.

Make it easy to keep up to date with more stories like this. Download the 13 ON YOUR SIDE app now.

Have a news tip? Email news@13onyourside.com, visit our Facebook page or Twitter. Subscribe to our YouTube channel.

Before You Leave, Check This Out