A temporary pause in student loan repayments has lasted long enough
More than 45 million former students are crumbling under student loan repayment obligations that now double credit card debt and total more than $1.5 trillion.
Progressives have called for universal loan forgiveness, and the Biden administration — aware of the difficulties — has shown openness to the idea, albeit on a limited basis.
But they are also aware that tens of millions of Americans are struggling with other forms of debt for which there is no federal remedy, including mortgages, auto loans and credit card debt.
They also consider that the students incurred this debt in exchange for an advanced degree, which will improve their earning capacity and quality of life.
How temporary is this student loan break?
About 30 months ago, in response to these considerations and instead of full loan forgiveness, the federal government used an emergency measure to temporarily suspend monthly student loan payments – regardless of income – for millions of Americans across the country, including about 900,000 in Arizona with more than $30 billion in debt.
This measure eased the economic hardship caused by the COVID-19 pandemic and gave borrowers a window of time to deal with their budgetary and financial pressures. It has been extended several times since.
Disaster averted:The pandemic hasn’t hit finances as badly as expected
Is the temporary really temporary?
As with any government program, the longer it lasts, the harder it is to undo, despite its intended temporary design. Beneficiaries become dependent on it and invested voters plead for sustainability. A recurring break becomes a loan forgiveness under another name.
The president’s big federal investments have hit record unemployment, the resurgence of small businesses and climate mitigation. They will build new infrastructure in every state. But that spending has also fueled additional debt and inflation.
It’s time to make some much-needed spending choices
Spending choices must be made.
The student debt moratorium, which has now been in place since March 2020, is costing taxpayers, including Arizonans, more than $11 billion each quarter.
So how should we prioritize federal spending overall – and even more narrowly within higher education? I believe we need to focus on those who need it most.
The overall reimbursement pause is very regressive. Two-thirds of student debt is owed by those in the top quarter of income. These high-income earners have their repayment commitment eased at the expense of taxpayers when the real purpose of the program was to relieve the pressure on those who were experiencing serious hardship.
The loan forgiveness is also unfair to people who left college to enter the workforce early and are now financing the debts of the better off. All this while the national income gap continues to widen.
Prioritizing aid to those who need it most
So what to do?
Reimbursement subject to resources.
The hiatus is expected to end at the end of this month, and the White House has held numerous meetings on this issue over the past week with a decision looming.
Congress should urge the administration to honor that date and simultaneously instruct the Department of Education to rethink loan repayment relief targeted to those most in need.
The president should then prioritize higher education dollars to increase Pell Grants that improve access for deserving low-income students.
Resuming payment obligations will never be easy or popular, but will become even more difficult if the Federal Reserve continues to raise interest rates. It’s time to bite the unpopular — but responsible — bullet now.
Fred DuVal is an Arizona civic leader, member of the Board of Regents, former gubernatorial candidate and former senior White House official. He is a regular contributor to The Arizona Republic. On Twitter: @FredDuVal.