Student Debt Pause Suggests Lack of Seriousness on Inflation and Deficits
According to news reports, the Administration will once again extend the current moratorium on student debt repayments, this time from May 1 through August 31. Over that period, most federal student loan borrowers will not be required to make debt payments, and no interest will accrue. In a previous analysis, we’ve shown this debt pause costs over $50 billion per year, would exacerbate inflation, and mostly benefits high-income, highly-educated workers – especially those with medical and law degrees. A four-month extension of the pause would cost $15 to $20 billion.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
If the Administration is serious about reducing the deficit, fighting inflation, and asking for more from the rich, they have a funny way of showing it. Extending the debt pause would be a massive handout to doctors and lawyers that would only feed more inflation and worsen the nation’s balance sheet.
There is absolutely no justification for this announcement. The unemployment rate among college graduates with a bachelor’s degree is 2 percent – which is in line with pre-pandemic levels and about as low as any time in the past two decades.
The pause itself costs almost twice as much as the entire Pell Grant program. But while Pell Grants go to low- and middle-income undergraduate students, the debt pause disproportionately benefits high-income Americans with advanced degrees. Between the interest forgiveness and inflation, a new lawyer has already effectively received $30,000 of debt cancellation; a new doctor has received the equivalent of $50,000.
Surely there are better-targeted ways to support college affordability.
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