Biden's Education Department is planning for student-loan borrowers to resume payments in October — and companies will begin charging interest a month before

• The Education Department is asking student-loan companies to prepare for the student-loan payment resumption.
• According to documents obtained by Politico, companies will start charging interest in September.

Plans are underway to transition millions of federal student-loan borrowers back into repayment this year.

Since March 2020, federal student-loan payments have been paused and interest has been waived to give borrowers financial relief during the pandemic. The pause was first created under former President Donald Trump, and President Joe Biden later extended it numerous times — most recently through 60 days after June 30, or 60 days after the Supreme Court issues a final decision on the legality of Biden's plan to cancel up to $20,000 in student debt for federal borrowers, whichever happens first.

New documents obtained by Politico through a public records request found that the Education Department has been issuing guidance to student-loan companies surrounding restarting payments. According to the documents, the companies should prepare to resume charging interest on borrowers' loans in September, and the department is anticipating borrowers will make their first monthly payment in October. Companies are required to notify borrowers of the payment resumption after August 31.

Additionally, per the documents, companies can continue to issue refunds to borrowers for payments received on or after March 13, 2020 if the borrower specifically requests one.

Along with resuming payments after an over-three-year pause, the department is also tasked with carrying out a range of reforms to targeted debt relief programs, like Public Service Loan Forgiveness, and creating a new income-driven repayment plan. The department on Monday announced it had awarded five companies new contracts to overhaul the repayment system and implement "major improvements" for borrowers, but as it noted in the press release, all of these changes are dependent on increased funding from Congress.

"This additional funding is essential to support students and student loan borrowers," the press release said. "The increase would allow FSA to continue to operate the student aid programs, implement critical improvements to student loan servicing, continue to modernize its digital infrastructure, and ensure successful administration of the financial aid programs through a simplified and streamlined application process for students and borrowers."

Biden's budget requested $2.7 billion for Federal Student Aid — a $620 million increase over the 2023 spending level — but House Republicans are unlikely to sign off on that request after recently proposing to cut spending for the Education Department, including banning student-loan forgiveness, in Speaker of the House Kevin McCarthy's debt ceiling bill.

"President Biden often says, 'Show me your budget and I'll show you your values.' Well, look at President Biden's plan to invest in America and you'll see an administration that values an opportunity for all," Education Secretary Miguel Cardona told reporters on Tuesday. "Likewise, Speaker McCarthy's proposal tells us everything we need to know about what he and the Republicans like and value. Tax cuts for the super rich, special interest in big corporations over supporting working families and their children."

The White House has previously said it is not deliberating a backup plan right now should the Supreme Court strike down Biden's debt relief, so it's unclear what additional measures, if any, would be put in place in that case to further protect borrowers. But some borrowers want to ensure that the department will keep pushing for relief, regardless of a court ruling.

"My fear, regardless of the outcome of the case, is that the White House is so desperate to restart payments and get back to normal that they've forgotten that 'normal' is a decades-long debt sentence; either way, it will be an excuse to say they'd done all the can," one borrower previously told Insider. "The only difference will be whether the majority of borrowers will be abandoned— or all of us will be."