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'It will never go away unless someone does -2-

"As long as the pandemic remains a presence in American life, support for economic policies that respond to the pandemic will be popular," said Ethan Winter, senior analyst at Data for Progress.

With student loans specifically, ending the benefit also runs the risk of being politically unpopular, he said. "Once you've done the pause, you then have to make a choice to allow the pause to lapse, and that means you have to be the party that's going to restart student loan payments," he said. As a result, a not insignificant percentage of the electorate "will have less money month-to-month."

Pierce, whose organization was one of 200 labor, civil rights, consumer and other groups to urge the administration to extend the pause, saw officials' decision to do so as a sign that they were listening to borrowers' concerns.

"This wasn't just a direct response to an economic catastrophe, this was a hedge against future uncertainty," Pierce said of the pause. "The Biden administration is finally starting to understand what pandemic-driven uncertainty is and what it means for the households that have student debt, if we're in a national emergency."

The push from advocates and lawmakers, including Democratic Senators Chuck Schumer and Elizabeth Warren, to extend the payment pause came at a time when the Biden administration was facing other political headwinds. After months of negotiations, Sen. Joe Manchin said he couldn't support Build Back Better, effectively killing -- at least temporarily -- Biden's social spending package.

White House Press Secretary Jen Psaki said during a press briefing in December that the challenges getting Build Back Better passed by year's end wasn't the reason why the administration decided to extend the student loan moratorium.

Still, the decision to do it at a time when the administration can control few other forms of economic relief, "makes a lot of sense," Sahm said. "They need to do something to protect the recovery, to protect people as much as they can weathering this later wave in the winter. This is one of the levelers they've got, they don't have a lot of them right now."

Still, extending the pause is politically tricky

Though extending the payment pause is popular among voters, that doesn't mean continuing to do it isn't politically tricky. For the Biden administration, "letting something expire is a moment for them to say 'see, the recovery is strong,'" Sahm said.

And indeed at least one high-profile economist, Larry Summers, took to Twitter(TWTR) to to deride the decision to extend the payment freeze, saying that low unemployment combined with strong household balance sheets for many Americans means "there is no special case for across the board relief now, unlike when it was put in place two years ago."

That's different from March 2020, when given the widespread uncertainty as the economy shut down, it made sense to assist borrowers broadly by going beyond the programs already available to help borrowers in distress, like plans that allow for repayment as a percentage of income, said Delisle, the senior policy fellow at the Urban Institute think tank.

"That's not the case anymore," said Delisle. The question now isn't whether the government has the ability to help borrowers struggling with their debt, according to Delisle. Instead "it's more an issue of who wants to be the politician to turn those loan payments back on, right when the virus is revving up again."

To Sahm, there still is a good economic case for relief because the Omicron wave indicates that the pandemic and the risk to families' finances it could cause is not over. "For the people who do lose their paychecks it is just as severe now as it was in March 2020," she said.

Even among borrowers with jobs, 89% of them weren't ready for payments to resume in February. That's according to a survey of 33,000 borrowers conducted by the Student Debt Crisis Center, an advocacy group, and Savi, a company that helps borrowers manage their student loans.

"People were probably looking at those data points and realizing that the stock market recovery and unemployment going down was not the same thing as borrowers being ready to start repayment," Seamster said.

Going back to the February 2020 status quo may not make sense

And indeed, that may be in part because even borrowers with steady employment faced challenges managing their debt before the pandemic. Though workers with a college degree earn more on average than their counterparts with a high school diploma, research from the Roosevelt Institute, a progressive think tank, indicates that's in large part because the value of a high school diploma has fallen so precipitously. Between 2000 and 2017, college educated workers have only seen their wages grow 6%, while median student debt grew from $10,000 to $20,000 during the same period, the study found.

That's just one data point indicating the ways in which borrowers can face challenges managing their student debt even when they're able to make use of their investment through a degree that leads to a job. The financial impact is even more acute for borrowers of color and Black borrowers in particular.

On balance, this kind of evidence suggests that borrowers won't be ready to restart repayments, even when the immediate threat of the pandemic subsides.

"In February 2020 -- before Covid -- student loans were a problem," Sahm said. "The idea that the White House can say we'll stop this temporary relief and do nothing more because we're back to February 2020 is problematic and ignores the pre-pandemic problems."

For Michael E. Skyer, a senior lecturer at the Rochester Institute of Technology, going back to February 2020 would mean continuing to scrimp -- Skyer and his wife buy discount groceries, keep cars, iPhones and refrigerators until they essentially give out, and live in an area further away from his work because of its cheaper property taxes -- to afford student loan bills. Even so, the payments they make largely go towards covering the interest.

"I felt like taking a spoonful of water out of the ocean," Skyer wrote in an email. During the pause, which froze interest rates at 0%, Skyer and his wife have been able to shave $51,000 off in student loan principal. Skyer said he doesn't think he'll ever be ready to return to a situation where his payments do little to bring down his overall balance. "Never before was it even a conceptual possibility to have student loan debt without compounding interest. And then it was. And they want to go back," he wrote.

A sign that broader reform is on the horizon

Both advocates and skeptics of broader student loan reform are taking the extension as a sign that the system may not return exactly to the way it was before.

"It certainly ups the ante on the politics of student loan forgiveness," said Delisle, who isn't in favor of widespread debt cancellation. "This is another rung on the ladder of ever more generous federal student loan policies," including temporarily expanding access to Public Service Loan Forgiveness. "I don't think they're done yet."

Pierce, whose organization has advocated for mass student debt relief, said of the payment pause extension "I don't want to read too much into it," given that the administration hasn't announced any broad-based debt cancellation. Still, Pierce said, "they're not doing the things that would suggest that's off the table."

Pierce notes that both Biden's statement announcing the extension of the payment pause and in Psaki's comments during the Dec. 22 press briefing cited Vice President Kamala Harris's influence in the decision to keep the freeze in place. To Pierce, "that bodes well" for the cause of mass student debt relief, given Harris' focus on student loan issues as a senator and attorney general of California.

When asked during an appearance on CBS's "Face the Nation" whether the administration needed to deliver on Biden's campaign promise to cancel $10,000 in student debt per person, Harris said the administration had to "figure out how we can creatively relieve the pressure that students are feeling because of their student loan debt. Yes."

Since taking office, the Biden administration has announced the discharge of more than $12 billion in student loans held by public servants, borrowers who had been scammed by their schools, and others struggling to access relief programs to which they are entitled. Still, the "overall goal" of the Biden administration's approach to the student loan system, according to the Department of Education spokesperson, "is permanent change that reduces indebtedness and makes college more affordable." The agency is working with the Department of Justice and the White House "to review options with respect to debt cancellation," the spokesperson wrote.

The question of whether pandemic-related student loan relief will turn into something more permanent mirrors a debate surrounding another pandemic-era benefit, Sahm said.

"In the crisis we've seen the delay in payments, which is clearly about a lifeline, it's clearly about disruptions to the pandemic," she said. "Forgiveness in student loans is clearly a more permanent step."

Similarly, the expanded child tax credit, which started as a pandemic-era lifeline and is being discussed as relief that could extend beyond the pandemic, "is a permanent shift in thinking about policies to support families with kids," she said.

But the politics of making student loan relief permanent is a bit more complicated, she said. The heterogeneous nature of student loan borrowers means that broad-based student loan relief would impact both those who are facing financial precarity and those who don't.

"With the child tax credit you just say, 'All families with kids get it,' " she said. With student loans, "it's a lot more tricky with who the policy helps and who it should help. This is not a slam-dunk-easy case, and whatever they do is going to have to be a meeting of the minds."

-Jillian Berman


(END) Dow Jones Newswires

01-15-22 1213ET

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