Student-loan borrowers might face even more hurdles resuming payments if Republicans end up passing their new proposal to cut funding for the Education Department

• House Republicans are proposing cutting funding for Federal Student Aid by $265 million.
• It denies Biden's budget request to increase funding for the agency by $620 million.
• This could pose hurdles to student-loan borrowers who are resuming payments after years on pause.

Republican lawmakers released their proposal to cut spending for the upcoming fiscal year — and it's not making things easy on student-loan borrowers.

Last week, Republicans on the House Appropriations Committee released a series of bills for funding federal agencies through fiscal year 2024. According to the committee's press release, the Labor, Health and Human Services, Education, and Related Agencies bill provides $147 billion for programs within those agencies, which is $60 billion below the fiscal year 2023 enacted level and $73 billion — or roughly a third — below President Joe Biden's budget request. 

The committee wrote in its fact sheet that the proposal is "strengthening congressional oversight of funds provided in the bill and restricting the Administration's ability to ignore congressional directives to fund an extreme, partisan agenda."

A key area Biden wanted to see increased funding in was the Federal Student Aid office, which is charged with facilitating the return to repayment this year for millions of borrowers after an over-three-year pause. According to the text of the committee's bill, its proposal would include $1.8 billion for student aid administration, which is a cut of $265 million below the current level.

"Right now, House Republicans are pursuing an appropriations bill that cuts $22.5 BILLION from education," Education Secretary Miguel Cardona wrote on Twitter. "It's the lowest allocation in 15 years. They are defunding education. Let's call this what it is - a Republican attack on our students' futures."

The bill is headed for a committee vote before being voted on by the full House. Biden's budget request in March included $2.7 billion for funding for the Federal Student Aid office, which is a $620 million increase from the 2023 level.

Cutting funding could pose significant challenges to borrowers, along with the operations of Federal Student Aid.

As Insider previously reported, the Education Department's ability to implement a range of programs aside from resuming payments — like reforms to income-driven repayment plans and Public Service Loan Forgiveness — all depend on whether it has the money to do so. Jared Bass, the senior director of higher-education policy at the left-leaning think-tank Center for American Progress, previously told Insider that "it's not just about one policy or one provision we're talking about."

"All of the student aid programs, everything from the process we use to fill out the application for FAFSA, through receiving Pell Grants, student loans, all the way through repaying those student loans, and ultimately, possibly receiving forgiveness, as well," he said, adding that "when funding for the account is in jeopardy, the quality of services that are being provided to students and families, to borrowers, and to taxpayers, gets called into question."

Some Democratic lawmakers have also expressed concerns about a lack of funding for Federal Student Aid. Massachusetts Sen. Elizabeth Warren joined 16 of her Democratic colleagues in May in sending a letter to Tammy Baldwin, the chair of the Senate Appropriations subcommittee, and Shelley Moore Capito, a ranking member, calling on them to fulfill Biden's budget request.

"The Department of Education has projected that without additional loan relief, ending the payment pause will result in a devastating spike in delinquencies and defaults," they wrote in the letter. "However, that projection would understate the catastrophic consequences for millions of working and middle-class Americans if FSA also lacks sufficient funding to provide the outreach and servicing needed to assist borrowers simultaneously needing to navigate the requirements and options for starting payments."

After the Supreme Court struck down Biden's plan to cancel up to $20,000 in student debt for federal borrowers on June 30, the Education Department announced a 12-month "on-ramp" period for borrowers once payments resume. Missed payments won't be reported to credit agencies during that time. The department also announced a new income-driven repayment plan to lower monthly payments, but it remains to be seen how effectively these changes can be carried out with a lack of funds.