Did Biden make the right decision to extend the student loan payment moratorium? |
The Biden administration has extended a moratorium on student loan repayments through August, but some economists have criticized the move for apparently running counter to other measures aimed at cooling the economy.
The idea is that the policy helps households stretch their budgets, which can fuel higher inflation. In some ways, this contradicts the Fed raising interest rates to slow the economy.
However, the pause does not only mean that borrowers do not have to make payments, but the loans do not earn any interest during this period. This has allowed many borrowers to make payments throughout the pandemic and significantly reduced the total owed.
Some Democratic lawmakers have argued that inflation is one of the reasons student loan repayments should be suspended. “This is an important step to ensure spending for working families does not increase as we work to fight inflation,” Rep. Pramila Jayapal (D-Washington).
Q: Did the Biden administration make the right decision to extend the moratorium on student loan payments?
Ray Major, SANDAG
NO: The whole student loan program is a complete debacle and should be treated holistically. Student loans are debt that is owed and must be repaid. The moratorium on payments during the COVID lockdown was very compassionate, but now, with many jobs in the economy, it’s time for borrowers to meet their obligations. Moreover, the extension of the moratorium runs counter to the federal government’s efforts to curb inflation.
Kelly Cunningham, San Diego Institute for Economic Research
NO: According to analysis of student aid programs at the Brookings Institution, nearly one-third of student debt is owed by the top 20% of households, while the top 20% of income groups bas hold only 8%. Unemployment among college graduates, the biggest recipients of loan deferrals who can pay their own debts, is currently just 2%. Why should non-university students be forced to subsidize the expenses of university graduates who voluntarily take out their loans?
Phil Blair, Manpower
NO: Anyone wishing to return to work should now work. At certain times, extensions should stop. If interest rates on student loans are unfairly high, they could be lowered or, in the meantime, monthly payments could be halved or terms extended for struggling students. Full forgiveness is unfair to families and students who have saved and worked to afford college.
Gary London, London Moeder Advisors
NO: Because it’s unfair. When applying for loans, most students did not distinguish between government-backed and non-government-backed loans. Millions of people are not eligible for abstention. Why not (at least for publicly funded universities) create legislation that addresses bloated university budgets and reliance on outdated and expensive teaching models? The pandemic has taught us that there are ways to provide a much cheaper college education and much 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 effects of inflation. This reduces the household budget and the moratorium on the repayment of student loans will help these households to cope with this. Research has shown that excessive student debt has social consequences such as increased stress, postponement of marriage and family, and postponement of home ownership, all of which can also be affected by inflation. , so any relief would be welcome at this point.
Bob Rauch, RA Rauch & Associates
NO: For those of us who have paid off our student loans in full, what message are we sending? For the economy, on the one hand, interest rates are increased to slow down inflation. On the other hand, we forgive the debt which, in essence, reverses this objective. It’s time to start paying it back and there are plenty of jobs to get it back – payment plans can be worked out for those who need it.
James Hamilton, UC San Diego
YES: That’s called kicking the can on the road. Politicians pretended that the $1.5 trillion student debt was free money that didn’t need to be funded by taxpayers and wouldn’t leave students with unmanageable burdens. We need to move to an honest accounting system funded entirely by taxpayers’ money. But getting there requires political compromise and courage, which are lacking in Washington, DC, these days. So for now, the moratorium will have to be extended.
Chris Van Gorder, Scripps Health
YES: The extension is only four months and will not have a significant impact on the economy, but will help people who may still be overwhelmed by the negative financial impact of a two-year pandemic. However, I do not believe that the moratorium should be extended indefinitely, as this could have a negative impact on the economy. The focus should be on offering debt forgiveness or restructuring to those who truly cannot afford to repay their loans.
Norm Miller, University of San Diego
NO: Although some people need an extension, there is no reason for blanket extensions for everyone, just like the checks Governor Newsom wants to send out as a gas tax refund . I would prefer that we channel the money into scholarships based on individual need and also to support industries that have a high demand for labour. We should also promote risk-based pricing that varies the student loan rate charged based on demand with full transparency on the odds of getting jobs by institution and field of study.
Jamie Moraga, IntelliSolutions
NO: We cannot continue to extend student loan relief. Before it was due to the pandemic, now it is due to inflation. What’s the next excuse? Nothing is free and the burden should not fall on taxpayers. Students should avoid accumulating debt by evaluating what they are studying and whether it is yielding a return on investment to pay off their debt. With our “back to normal” and plenty of jobs available, there is no need to keep extending relief programs like this.
David Ely, San Diego State University
NO: It is difficult to understand the choice to extend the moratorium for four months. Borrowers’ ability to resume loan repayments is unlikely to change much by August. The assertion that an extension is needed conflicts with the administration’s position that the economy is strong. If the main objective was to give time to restructure the student debt system, the moratorium should have been extended for more than four months.
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