Seven Reasons Not to Extend the Student Loan Repayment Pause
WASHINGTON, D.C., November 21, 2022
With the Biden administration’s radical student loan bailout stalled in court, rumors that President Biden will extend the student loan repayment pause are surfacing again. As of November, borrowers haven’t had to make a payment in 33 months; a further extension would be a bad idea. Here’s why:
1. We are no longer in a national emergency.
Student loan repayments were put on hold because of COVID-19 shutdowns. When businesses reopened and people could return to work borrowers could have resumed repayment on their loans. Further, blue-collar workers were most severely impacted by the shutdown of our economy, not college-educated Americans—most of whom could work from home.
2. Adds to inflation.
According to one analysis, extending the repayment pause through 2023 will increase inflation by 20 basis points. Americans are already struggling to afford turkeys for Thanksgiving and gifts for Christmas this year—we shouldn’t do anything to make this crisis worse for American families.
3. Costs taxpayers an arm and a leg.
Thus far, this moratorium cost taxpayers over $155 billion and added billions to the deficit. Our federal student loan system is already in the red—and getting worse. According to a recent Government Accountability Office report, the Department of Education’s budget for student loans is off by $311 billion. Another extension will exacerbate this problem and ensure the federal student loan program continues to be a drain on taxpayers.
4. Helps high income borrowers most.
Graduate students benefit the most from pauses on repayment. For many students, higher education is an asset that will add to an individual’s lifetime income. Many doctors and lawyers may not start out earning much, but they have particularly high-income potentials that could allow them to pay off their own loans, which is why these borrowers receive up to nine times the benefit of someone with a bachelor’s degree.
5. Does not solve the real problem—the rising cost of college.
A pause on repayments and interest does nothing to hold colleges and universities accountable for offering high-priced programs that do not lead to a positive return on investment for students and taxpayers. We must start addressing the root of this problem, the high cost of college, instead of asking taxpayers to foot more and more of the bill through costly repayment pauses and student loan bailouts.
6. Creates a constant state of confusion.
These kinds of policies do not set borrowers up for success. In fact, President Biden’s continued indecision over the last two years kept student loan servicers and borrowers in a constant state of confusion. Because of the poor communication by the Biden administration, servicers, financial aid administrators and borrowers are left completely in the dark about what is happening with federal student loans.
7. Encourages Overborrowing
Borrowers coming out of college in the last three years haven’t had to make a single payment towards their student loans. Young borrowers should be taught how to take responsibility for the loans they agreed to take out—this repayment pause does just the opposite and encourages prospective students to borrow more than they need because they expect it will not have to be repaid.