Expensive pause
President Joe Biden blundered last week with his extension of the pause on student loan payments through Aug. 31. What was a needed emergency measure at the start of the pandemic is no longer justified.
It is hard to make an argument that college graduates are struggling right now. The unemployment rate for Americans with a bachelor’s degree or higher is a mere 2 percent. There is a near-record number of job openings. It’s a similar story for Americans who took a few college courses but either didn’t graduate or left with an associate’s degree. The unemployment rate for Americans with “some college” is 3 percent.
They were in a far different situation in the spring of 2020 and even early 2021, as Americans of many walks of life struggled to find work or had to stay home for health reasons or to care for children or other relatives. Suspending student loan payments then was a way to get extra cash into people’s hands quickly. That need, thankfully, is no longer pressing.
As Biden himself said last week: “Americans are back to work. And that’s good news for millions of families who have a little more breathing room and the dignity that comes from earning a paycheck.”
The White House tried to cast this latest extension as necessary, given how inflation is burdening families. Rising prices of gas, rent, food and cars are a hardship, but forgiving interest on student loans for four more months offers the biggest benefits to people who have earned degrees in medicine and law. These people go on to have lucrative careers. Meanwhile, the 64 percent of Americans who do not have a college degree don’t benefit at all from Biden’s pause on loan repayments. It would be far more equitable and effective to give rebates to low- and moderate-income households.
This extension also comes with a substantial price tag: about $20 billion. That’s nearly the entire budget of the Pell Grant program that specifically aids the neediest students with paying for college.
It’s telling that it wasn’t just Republicans blasting Biden for this move. Prominent Democratic economists also expressed exasperation.
This extension was about the politics of an election year when control of both houses of Congress is up for grabs. Democrats, including Biden, campaigned in 2020 on helping to make college more affordable and canceling at least $10,000 in student loan debt per borrower. With Biden’s domestic agenda largely stalled, many of his fellow Democrats urged the president to extend loan payment forbearance that is expected to impact about 41 million adults ahead of the midterm elections.
The political calculation was an obvious one. But it did little to help the stressed-out Americans who need aid the most.