How 10 student-loan borrowers are coping with the highs and lows of Biden’s debt relief announcement
2 people whose entire student-debt loads will be wiped out due to Biden’s announcement talk about what’s next for their futures: ‘I get to not worry about losing my home’
Meet a professor who qualifies for Biden’s student-loan forgiveness but still has years of repayment to go and feels ‘disheartened’ the relief wasn’t bigger: ‘There’s this looming sense of hopelessness’
Meet a government worker who regrets refinancing her student debt because she didn’t know it would block her from federal loan forgiveness: ‘I never would have done that’
Hours-long hold times with their student-loan company are keeping public servants in a ‘limbo period’ wondering if they’ll get the debt relief they qualify for
Meet a borrower with $43,000 in student debt who thought he was getting Biden’s loan forgiveness, only to have it ‘yanked away’ a month later
A first-generation college student with $146,000 in student debt says blocking Biden’s relief ‘feels like a really sick game’: ‘It’s not the American dream that we were promised’
Meet a Republican who would have all $10,000 of his student loans canceled under Biden’s plan but thinks it’s an unfair policy
Meet an adjunct professor with $230,000 in student debt who worries payments will restart without Biden’s loan forgiveness: ‘It will be an excuse to say they’d done all they can’
And the most recent extension is very likely to be the final one. Education Secretary Miguel Cardona told lawmakers in early May that “we’re going to resume payments for 60 days after, but no later than June 30. We’re going to begin that process.”
“We’re confident, Senator, that the Supreme Court will rule in favor of the targeted debt relief, providing relief for millions of borrowers, and we want to make sure that the information that borrowers get is accurate. We do plan on making sure it’s a smooth reentry to repayment,” Cardona said, adding that “the emergency period is over, and we’re preparing our borrowers to restart.”
But some economists think the administration — and the country — should start prepping for an economic strain once payments resume. Marshall Steinbaum, senior fellow at the Jain Family Institute and economics professor at the University of Utah, told Insider that “it’s pretty clear the payment pause has been very stimulative to the macroeconomy.”
“I think it’s clear that the fact that people have more spending power means they can spend more, and that’s good for aggregate demand,” Steinbaum said. But he added that if the government starts to try collected on student loans that borrowers are unable to repay, “it’s just a more onerous way of operating a lending portfolio of trying to collect debt that fundamentally can’t be collected and trying to squeeze the borrowers as much as possible in order to make that debt collectible. And that’s very bad for the macroeconomy.”
‘We’re looking at a pretty severe fiscal contraction’
Those positive economic impacts could quickly be reversed once payments resume. “We’re looking at a pretty severe fiscal contraction,” Steinbaum said.
And Mark Zandi, chief economist at Moody’s Analytics, told CNBC on Tuesday that restarting student-loan payments after an over three-year pause would stunt economic growth and strain consumers’ wallets.
“I don’t think a recession is going to happen, and I don’t think the student-loan payments are going to be the thing that pushes us in. But they’re a weight, it’s about 20 million student-loan borrowers that haven’t been paying, they’ll have to begin paying more or less in September,” Zandi said.
“So if you do a little bit of arithmetic, it’ll shave a couple tenths of percent off of GDP over the coming year. Now, in a more typical time, that’s not really that big a deal,” Zandi added. “The economy can digest that gracefully. But in the current environment with the economy as weak as it is, recession risks as high as they are, a couple of tenths of percent can matter. I don’t think that this is what’s going to push us in, but it’s certainly a weight at a pretty significantly inopportune time.”
The economy has made strides in recovery since the beginning of the pandemic, with employment returning to pre-recession levels much faster than in the wake of the 2008 financial crisis. The student-loan payment resumption risks jeopardizing that recovery.
The Supreme Court decision will be a major factor in economic impacts
The Supreme Court heard oral arguments in the two conservative-backed cases that paused the implementation of Biden’s broad student-debt relief in February, and since then, millions of borrowers have been waiting for a final decision on the legality of the relief — expected by the end of June.
Democratic lawmakers have been sounding the alarm on the harmful impacts a payment resumption would have without Biden’s broad debt relief. Massachusetts Rep. Ayanna Pressley previously told Insider that she would “absolutely” push for a payment pause extension should the Supreme Court strike down the loan forgiveness, saying that the pause has “been game changing and transformative for so many people. By eliminating that bill, I mean, do you all understand that there are people that are paying monthly student loan bills that are the equivalency of a mortgage?”
And Rep. Ro Khanna wrote on Twitter on Tuesday that “resuming student loan payments without providing relief will be devastating for 45 million borrowers. It is wrong to forsake students.”
“The repayment pause causes people to get mortgages, get car loans, all of the things that if you’re looking for macroeconomic stimulus from a repayment pause that you would expect,” Steinbaum said. “So I greatly fear the end of the repayment pause, especially if cancellation doesn’t happen either.”