Biden's Student Loan Repayment Pause Is a Short-Sighted and Costly Manipulation of Power

In August 2022, the Biden administration attempted to enact a multi-billion-dollar student loan "forgiveness" program to help families with the financial strain caused by the pandemic. In response to this terrible idea, I came up with a list of 13 reasons as to why we should not have student loan "forgiveness." Thankfully, a federal court in Texas ruled in a 26-page opinion that the student loan "forgiveness" program was a "complete usurpation of congressional power" and "not correctible." Whether or not Biden was using student loan "forgiveness" to garner votes seems to be immaterial because he continues to support shoddy policy when it comes to student loans. 

While the Biden continues to fight the student loan "forgiveness" ruling with the appeals process, Biden decided to extend the student loan repayment pause through June 2023. This pause has been in effect since March 2020 in response to the pandemic vis-à-vis the CARES Act. Essentially, what the policy does is three-fold: 1) set interest rates on government-held federal student loans to 0 percent, 2) suspend all due payments, and 3) suspend collection efforts against borrowers in default. While this sounds fine and dandy on paper, do not mistaken Biden's supposed benevolence for shoddy and problematic policy. 

The initial rationale for the pause is long past. Remember that Biden instituted the pause in response to the pandemic. In September 2022, Biden said on 60 Minutes that the pandemic is over. That does not stop Biden from using the pandemic as a so-called "rationale" to pass whatever he feels like. It is not only the pause that he has done this. Biden pulled the same stunt when trying to justify the student loan "forgiveness." There is still a ban on unvaccinated international travelers entering the United States, a policy that almost every other major country has already lifted. Biden also extended the COVID emergency declaration another 90 days earlier this month, even though he declared the pandemic over two months earlier. If that is not enough to make your blood boil, the federal government recommended this past Monday to bring mask mandates back to purportedly protect people from "long COVID," even though there is or never was a basis for mask mandates (see here and here). Apparently, the pandemic is over except when it is politically convenient to say it is not. As I brought up in April with the mask mandates, the policies are not about public health or about helping the plight of the common man; it's about power and control. 

Then there is the price tag of the student loan repayment pause. The bipartisan Committee for a Responsible Federal Budget (CRFB) estimates that this new extension will cost $40 billion. This $40 billion will be on top of the $155 billion that the pause has cost between March 2020 and August 2022. If Biden keeps extending the pause through his presidency, it will end up costing a pretty penny (see below). 

Much like with the student loan "forgiveness," the student loan repayment pause is regressive in nature. Who benefits the most from interest forgiveness within the student loan repayment pause? According to the CRFB, it is not the lower-income households, but doctors and lawyers that disproportionately benefit.   

The regressivity argument gets more irksome when you see that it is those with the higher amounts of student loan debt (almost always those with graduate degrees) that account for most of the student debt (see below).

As I illustrated earlier this month, fiscal policy has played its role in contributing to the high levels of inflation that the United States is experiencing. The student loan repayment pause also contributes to inflation. The CRFB found that Biden's student loan repayment pause will add 15 to 20 basis points to inflation. It is ironic that Biden wants to help with alleviating financial pressures of households when all he is doing is adding fuel to the economic issues that he is claiming to fight. 

In summation, the student loan repayment pause cannot be justified for a few reasons. Using the pandemic rationale is nothing more than a politically convenient excuse for the Biden administration to spend more money and pander. Regardless of whether you think the pandemic should have ever been a justification for such a pause in the first place, the pause is costly, regressive, and inflationary.  Similar to many overreaching pandemic policies, the student loan repayment pause should not be extended. 

On top of that, this reminds us that the student loan repayment pause is part of the greater federal student lending scheme that has had many negative consequences to higher education, including "skyrocketing college prices, to enabling credential inflation, to confusing the heck out of [lenders], borrowers, and the American public." A recent Government Accountability Office (GAO) report shows that federal students have not made $114 billion in profit that was initially projected, but have actually cost $197 billion since 2010. This is a difference of over $300 billion, and the student loan repayment pause was contributed $102 billion to this $300 billion differential. What does all of this show us? Not only should the student loan repayment pause be lifted posthaste, but the government should do the right thing and get out of the student loan business all together.