Extending the student loan moratorium (again) is a terrible idea
Allowing 35 million Americans to delay paying their federal student loans was a questionable policy when it began in March 2020 in the depth of the pandemic crisis. It’s a terrible idea now. The White House should not extend the student-loan moratorium. Such a move would be the eighth time the debt freeze has been prolonged.
The moratorium began as a way to quickly deliver some relief and extra funds to people as much of the U.S. economy shut down because of the coronavirus. By April 2020, 23 million Americans were out of work. State unemployment systems were overwhelmed and slow to pay out claims. There were literal breadlines as long streams of cars lined up for donated food. Today it’s a very different story. Unemployment is at one of the lowest levels in several decades. There is no crisis to justify extending this costly policy.
The most pressing economic problem now is disastrously high inflation, which also registers as the top concern of voters. Biden claims it’s a top priority of his, too, but counterproductively extending the moratorium would not instill confidence that he is doing what he can. The Federal Reserve is aggressively raising interest rates to tame inflation, but government spending also fuels inflation. Pausing the debt payments, yet again, costs the federal government $52 billion a year, according to the Committee for a Responsible Federal Budget.
Sure, an extension would be popular, especially with younger voters, and Georgia has a Senate run-off coming up. During the state’s last run-off in 2021, the Democratic candidates leaned hard in favor of more generous stimulus checks. It helped them triumph. Back then, however, there was better justification for additional aid, given that the recovery was still shaky and more than 10 million Americans were unemployed. Now, an extension of the student loan moratorium looks more like buying votes with taxpayer money. Another unconvincing argument to keep the student debt pause going is because courts have blocked President Joe Biden’s initiative to cancel up to $20,000 of student debt per borrower, putting its future in doubt.
At least in that scheme, the White House somewhat limited who was eligible. (Only individuals earning less than $125,000 and married couples earning less than $250,000 were able to apply.) The student-loan moratorium, on the other hand, applies to all borrowers, including lawyers, doctors and other highly paid professionals. The largest benefits go to well-off Americans, who have already enjoyed nearly three years of no repayments and no interest accumulation. Hard-working taxpayers who did not go to college, or who did not borrow to do so, would surely love to get this kind of deal.
The right course of action is to put a moratorium on this moratorium.