In response to the COVID-19 pandemic, in March 2020 the federal government froze borrowers’ repayment obligations of their federal student loans. It was a bold but necessary intervention at a time when unemployment had spiked to more than 14%.
Fast forward more than two years: The freeze has now been extended six times — four times under the current administration — in spite of low unemployment and a full reopening of the economy. The decision to keep extending the payment pause, which is now set to expire on Aug. 31, is not sound policy and only causes confusion and frustration as the public attempts to return to normal. It’s also highly regressive as high-income earners with graduate degrees are the ones who are overwhelmingly benefiting most from this reprieve.
In recent remarks, the Biden administration has signaled support for a loan forgiveness program in “the coming weeks” which would forgive $10,000 for borrowers under an income tested formula. Continued targeted forgiveness is an appropriate way to ensure that those in hardship receive the relief they need.
Proactively announcing the final end of the moratorium and concrete plans to forgive $10,000 in student loan debt cannot come soon enough.
Endless extensions of the repayment freeze create uncertainty that makes long-term financial planning impossible. Borrowers can’t budget without knowing when repayments begin. Current students do not know how much they should borrow because they are not sure how much, if any, will need to be repaid. The private sector does not know whether there is a viable business in helping borrowers lower their interest rates through refinancing. The entire system is frozen, while taxpayers pay $15 billion every quarter.
Those least in need of government assistance benefit most from these numerous extensions. Today, the unemployment rate for college graduates is barely above 2%. Their median income is far above the national average. Almost all the people who have student loans — especially those who took out loans to finance advanced degrees — have jobs that enable them to repay. The cohort who are facing serious financial challenges or are in default are the most harmed by the lack of clarity and predictability. The Biden administration must lead an engaging public campaign to prepare borrowers for the end of the moratorium on Aug. 31.
Furthermore, as the administration continues to finalize its student debt cancellation plan, we must recognize that large-scale forgiveness does not address the new borrowers who will be arriving on college campuses this fall. Current tuition levels are unsustainable, community college should be debt free, and we need a serious national dialogue about excessive credentialing and expanding the post-high-school options for career-oriented education and training.
Today, millions of jobs list a four-year college degree as a prerequisite when the required skills are not provided during a college education. We should empower young people to choose the education pathway they feel best prepares them for the profession they are interested in, and we should stop barring people from job opportunities based on irrelevant educational requirements.
We need a national strategy for building a higher education finance system that truly creates opportunity and upward mobility. However, we cannot begin this important dialogue while emergency policies from March 2020 remain in place. We implore the administration to end the moratorium on Aug. 31 and announce a definitive debt forgiveness plan.
