Our elected officials in Washington have been busy the last few days. Yesterday on Thursday, June 1st the Senate passed wide-ranging legislation to suspend the looming $31.4 trillion debt ceiling. The bill, the Fiscal Responsibility Act, would suspend the debt ceiling through Jan. 1, 2025 while cutting federal spending, This legislation flowed from a bipartisan deal struck by President Biden and House Speaker Kevin McCarthy.
Key Features of Bill:
- Debt ceiling suspended through Jan. 1, 2024
- Will trim spending for unspecified domestic programs
- 3% cap on increases for military spending in fiscal 2024
- End the three-year freeze on student-loan payments
- Expedite large-scale energy and infrastructure projects
- Provide $45 billion for a program assisting veterans exposed to toxic substances
As you will have noticed, one of the most relevant effects this new bill has on the average investor is that it ends the 3-year freeze on student loan payments! As of now, student loan payments are expected to resume in August 2023, with the first payments being due in September. Please keep this in mind when budgeting for the next few months.
The bill itself did not touch spending for major—and expensive—programs such as Medicare and Social Security. Instead, it focuses on reducing areas of discretionary spending. According to the Congressional Budget Office, this new legislation is expected to reduce government deficits by approximately $1.5 trillion over a decade when compared with the baseline forecast.
I know that many people will be affected by the student loan portion of the new legislation. If you have any questions or need help adjusting your financial plan to accommodate the reinstituted student loan payments, please feel free to reach out!
Source: Wall Street Journal, “Senate Approves Deal Raising Debt Ceiling, Averting U.S. Default”