In response to the Covid-19 pandemic in March 2020, President Trump signed the CARES Act that, in part, temporarily paused the collection of payments from federal student loan borrowers. Since he took office, President Biden has extended that moratorium six times. Last Wednesday, he announced the latest extension, delaying payments until August 31. However, this move has sparked serious debate, with some arguing it is time to resume collection and others proposing mass student loan forgiveness.
The administration argues that the payment suspension is necessary to alleviate the pandemic’s economic toll on average Americans. In his announcement, Biden said that the “continued pause will help Americans breathe a little easier as we recover and rebuild from the pandemic.” Without the extension, federal student loan borrowers would have had to resume payments on May 1. President Biden and congressional Democrats that support the move argue it will give these individuals more time to prepare.
While most Democrats support the extension, many progressives have called for the cancellation of student loans entirely. While Biden advocated for forgiving $10,000 in federal student loans per borrower during his 2020 presidential campaign, he has not yet acted on that pledge. Some Democratic lawmakers have pushed the administration to exceed that, pressing for Biden to cancel $50,000 in debt per borrower or even cancel federal student loan debt entirely. These Democrats argue that easing student debt would free up borrowers’ finances and stimulate the economy. Also, they suggest it would promote racial equity, as minority communities tend to borrow more. Lastly, they say student loan forgiveness is broadly popular — some polls show over 60% support for the policy — and warn that inaction could demoralize young voters critical to the Democratic base ahead of the upcoming midterm elections.
Many on the Right criticized the extension of the payment pause, saying it is unfair to borrowers who have already paid off their debt and society more broadly, punishing them for reckless personal financial choices of others. Many conservatives point to data suggesting the delay has cost over $100 billion so far and will cost up to $50 billion every year it continues. They argue it is yet another government handout and a blatant attempt to appease the progressive members of Congress that want universal debt cancellation. They also point to studies that show mass student debt cancellation would not provide the widespread economic benefit its proponents claim, and the minimal impact would primarily benefit an already privileged class. Lastly, they argue the move would only further worsen inflation and permanently damage the higher education system.
The Biden administration’s decision to make the student loan moratorium longer rattled certain stocks, leaving investors wondering what might happen next. In response to the Biden administration’s decision, SoFi Technologies shares fell more than 11%. The fintech platform, which provides private student loans and refinancing options, slashed its 2022 projected net revenue by 10% and adjusted earnings by 44%.
The Covid-19 pandemic has brought the student loan crisis to the forefront as millions of borrowers suffer from crippling debt. The sky-high interest rates on those loans present a systemic hurdle that disproportionately bears on already marginalized groups. Also, easing the financial burden on low-income borrowers frees up capital and benefits the broader economy. President Biden has rightly paused the repayment of federal student loans, protecting our nation’s most vulnerable as the pandemic has put their finances in even more jeopardy. As student loan debt threatens the financial stability of everyday Americans, the administration must continue to work to ease that stress.
In 2020, the government shut down businesses to prevent the spread of Covid. At the time, it made sense to pause loan payments because the government was preventing people from working to pay them off. Now, everyone is back to work and should pay back the loans they chose to take out. The radical progressive voters who wish to cancel student loans should be ignored. Students made the decision to take out the loans, and it should not be the responsibility of taxpayers to foot those bills.
