The Biden administration has extended a moratorium on student loan payments through August but some economists have criticized the move because it seemingly goes against other measures to cool the economy.
The idea is the policy helps households stretch budgets, which may add fuel to rising inflation. In some ways, it contradicts the Fed’s lifting of interest rates to slow the economy.
However, the pause doesn’t just mean borrowers don’t have to make payments — but the loans do not accrue any interest during this time. This has allowed many borrowers to make payments throughout the pandemic and take a big dent out of the total owed.
Some Democratic lawmakers have argued inflation is one of the reasons why student loan payments should be paused. “This is an important step to ensure that working families’ expenses aren’t going up as we work to fight inflation,” said Rep. Pramila Jayapal (D-Washington).
Q: Did the Biden administration make the right call extending the student loan payment moratorium?
NO: The entire student loan program is a complete debacle and must be holistically addressed. Student loans are a debt that is owed and needs to be repaid. The moratorium on payments during the COVID lockdown was highly compassionate, but now, with plentiful jobs in the economy, it’s time for borrowers to live up to their obligations. Furthermore, extending the moratorium works against the federal government’s efforts to curb inflation.
- Kelly Cunningham, San Diego Institute for Economic Research
NO: According to Brookings Institution analysis of student relief programs, nearly one-third of all student debt is owed by the wealthiest 20 percent of households, while the lowest 20 percent of income groups hold only 8 percent. Unemployment among college graduates, the biggest beneficiaries of loan deferrals who can pay their own debts, is currently only 2 percent. Why should noncollege attendees be forced to subsidize the expenses of college graduates voluntarily taking out their loans?
NO: Everyone who wants to be back at work should now be working. At some time extensions have to stop. If interest rates on students loans are unfairly high they could be lowered or in the meantime, monthly payments could be cut in half or terms extended for challenged students. Total forgiveness is unfair to families and students who saved and worked to put themselves through college.
- Gary London, London Moeder Advisors
NO: Because it is unfair. When they applied for the loans, most students didn’t differentiate between which loans were government-backed and which weren’t. Millions are not eligible for forbearance. Why not (at least for publicly funded universities) create legislation that addresses bloated university academic budgets and dependence on outmoded and costly teaching models? The pandemic has taught us that there are ways to provide college education much cheaper and to many more. Focus on that.
- Alan Gin, University of San Diego
YES: While the economy is growing and the labor market is strong, people are feeling the impacts of inflation. That is cutting into household budgets and the moratorium on student loan payments will help those households deal with that. Research has shown that excessive student debt is having social consequences such as increased stress, the delaying of marriage and family, and the delaying of homeownership, all of which may be impacted by inflation as well, so any relief would be welcome at this point.
- Bob Rauch, R.A. Rauch & Associates
NO: For those of us who paid our student loans back in full, what message are we sending? For the economy, on the one hand, we raise interest rates to slow inflation. On the other hand, we forgive debt that in essence, reverses that goal. It is time to start paying it back and there are plentiful jobs out there to earn it back — payment plans can be worked out for those in need.
- James Hamilton, UC San Diego
YES: It’s called kicking the can down the road. The politicians pretended that the $1.5 trillion in student debt was free money that didn’t need to be funded by the taxpayers and that wouldn’t leave students with unmanageable burdens. We need to change to an honest accounting system that’s fully funded with tax dollars. But getting there requires political compromise and courage, which are lacking in Washington, D.C., these days. So for now, extending the moratorium will have to do.
- Chris Van Gorder, Scripps Health
YES: The extension is for four months only and won’t have a significant impact on the economy, but will help individuals who may still be overwhelmed by the negative financial impact of a two-year pandemic. However, I don’t believe the moratorium should be extended indefinitely, as that could have a negative impact on the economy. The focus should be on offering either debt forgiveness or restructuring to those who truly cannot afford to repay their loans.
- Norm Miller, University of San Diego
NO: While some people need an extension, there is no reason for blanket extensions for everyone, just like the checks Gov. Newsom wants to send out as a gas tax rebate. I’d prefer we channel money into scholarships based on individual need and also to support industries that have strong labor demand. We also should promote risk-based pricing that varies the student loan rate charged as a function of demand with full transparency on the probabilities of securing jobs by institution and field of study.
- Jamie Moraga, IntelliSolutions
NO: We can’t continue to extend student loan relief. Before it was due to the pandemic, now it’s due to inflation. What’s the next excuse? Nothing’s for free, and the burden shouldn’t fall on taxpayers. Students should prevent debt accumulation by weighing what they study and if it yields a return on investment to pay off their debt. With our ‘return to normal’ and plenty of jobs available, there’s no need to continue to extend relief packages like this.
- David Ely, San Diego State University
NO: It is difficult to understand the choice to extend the moratorium by four months. Borrowers’ ability to resume loan payments is unlikely to change by much between now and August. The claim that an extension is needed conflicts with the administration’s stance that the economy is strong. If a primary goal was to provide time to restructure the system of student debt, the moratorium should have been extended for longer than four months.
