The urgency of the student loan forever
Merry Christmas, student loan borrowers. Taxpayers will have to content themselves with expressing their grievances to the Festivus. This is the result of the Biden administration’s decision on Wednesday to further extend its payment moratorium until May 1. Unlike its last hiatus until January, the administration is not saying this extension is final, presumably because it is not.
The Cares Act of March 2020 relieved borrowers from making payments on $ 1.6 trillion in federal student loans and waived interest accrual until September 2020. President Trump extended the hiatus until January despite the lack of legislative authorization to do so. Mr Biden has compounded the damage to taxpayers and the separation of powers by extending it until September.
Over the summer, the Administration resisted progressive pressure for another extension. But he eventually capitulated, as he did with the Centers for Disease Control and Prevention’s moratorium on rental evictions. The education ministry said in August that this “final extension” was necessary to “reduce the risk of delinquency and default.” Democrats don’t want the pandemic emergency to end because it is too useful politically.
Allegations of financial hardship for borrowers were questionable then and are even more so now, as the unemployment rate among bachelor’s degree holders fell to 2.3%. Some 1.1 million more were employed in November than in February 2020. The hiatus saved borrowers an average of $ 400 per month.
Anecdotes abound about borrowers who use these savings to pay off higher-interest debt, gamble on the stock market, and make down payments on homes. Borrowers should almost be dumb to make payments they don’t have to make since they don’t earn interest on loans.
The forbearance cost the government about $ 95 billion since the Treasury did not receive a stay on its debt to fund the loans. The administration’s latest extension will raise taxpayers’ bills to $ 110 billion, most of which has not been affected by Congress.
This can be a down payment on a larger loan cancellation. Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren want the administration to release $ 50,000 per borrower, which would cost the government $ 1,000 billion, according to the Brookings Institution.
Mr Biden said in January he doubted he had the legal authority to write off student debt. But in the spring, he asked the Department of Education to conduct a legal analysis and then appointed Toby Merrill as deputy general counsel. Ms Merrill wrote a note to Ms Warren this year arguing that the President has authority.
Mr Biden is under pressure to appease progressives after West Virginia Senator Joe Manchin took down Build Back Better. Politico reported on Saturday that White House officials had postponed meetings with progressive groups against extending the loan hiatus and said resuming payments was part of the return to normal. Then came Mr. Manchin’s bomb.
âWith the BBB delay, child tax credits will expire and student loans will restart in a few weeks. Working families could lose thousands of dollars / month as prices rise, âsaid New York Rep. Alexandria Ocasio-Cortez. tweeted Monday. “That alone is a reason for @POTUS to act on student loans ASAP – with a moratorium or cancellation.” Mr. Biden obliged.
A larger loan forgiveness would be a huge usurpation of Congressional purchasing power, but politics trumps law. Ms Warren says the Administration has already set a precedent with its repeated extensions of forbearance. On the decline in the polls and with his program stuck in Congress, Mr Biden is likely to resort to executive order governance. Forbearance may just be the start.
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Published in the print edition of December 23, 2021.