Student loan borrowers will face serious pressure this spring when a federal moratorium on their debt payments ends amid soaring inflation.
Tens of millions of Americans are preparing to resume paying their student loans for the first time since March 2020, after the fastest annual rise in consumer prices since 1982.
The costs of food, housing, and other basic goods are rising as millions of Americans feel the huge weight of student debt.
Currently, people’s budgets are already shrinking due to rising food and heating costs. Suddenly hitting people with a student loan payment of an average of $400 a month would be a severe double whammy, said Thomas Jockey, an organizer at Debt Collective.
Consumer prices rose 7 percent in December from the same month a year earlier, marking the fastest annual price increase in nearly 40 years. High inflation is a huge political challenge for President BidenThe Democratic House Democratic Party’s attack on its Republican counterpart in the last quarter of 2021 Putin’s “Brezhnev Doctrine” involving Ukraine may backfire. Democrats are heading into the midterm elections, and advocates have warned that a lack of action to forgive student loan debt will also follow them on the right track.
During his 2020 presidential campaign, Biden campaigned to waive at least $10,000 in federal student loans per person. But progressives demanded that Biden waive up to $50,000 in federal student debt for each borrower.
Rising inflation fueled more pleas for Biden to eliminate student debt through executive action.
“With inflation, people are really struggling and then getting another $500, $700, $1000 a month, I think it’s going to be incredibly problematic. Especially when it comes to thinking about what the administration needs to do to get the base excited in 2022 and 2024. , especially among young people.. “I think his failure to meet the needs of this key demographic would be incredibly problematic,” said Joseph Jevargues, CEO of Our Revolution.
As the White House faces widespread calls for student debt forgiveness, Biden has pushed Congress to pass legislation that charts a course for mass cancellation. But with his party’s narrow control of the Senate, Democrats are looking to Biden to use his executive power to cancel the debt.
Senior Democrats, including Senate Majority Leader Charles SchumerChuck Schumer Joe Biden’s Disastrous 48 Hours in Biden’s Desperate Bid to Keep Minority Voters Corporate CEOs Urge Senate to Override Stalling to Pass Voting Rights More (DN.Y.), argues that Biden has the power to cancel student loan debt on his own.
Last spring, White House officials called on the Education Department to issue a memo on Biden’s legal authority in the matter. The White House and the agency did not release more information about the status of the memo when pressed by The Hill.
Nearly 43 million Americans owe a total of approximately $1.6 trillion in student loans to the federal government.
In Biden’s first year in office, nearly $12 billion in student loans to more than half a million borrowers were canceled — but only in certain cases. This includes borrowers with complete and permanent disabilities, those who attended defunct schools or those employed in the public service.
Biden also extended the pause on federal student loans and interest accrual through the beginning of May, past a previously set date of January 31 to raise the student loan deduction.
Some experts have played down concerns about the financial burden the majority of borrowers will face when federal student loan payments resume in May.
In an interview, Mark Kantrowitz, vice president of research at Saving For College, noted employment trends as the economy recovers.
“The people most affected by the economic disruption of the pandemic are not people with college degrees. Unemployment rates among people with college degrees are much lower than in the rest of the population,” Kantrowitz said.
The unemployment rate for adults 25 and older with a four-year college degree was 2.1 percent in December, according to the Department of Labor, but 4.6 percent of job seekers with only a high school diploma were unemployed.
Sandy Baum, a non-resident senior fellow in the Urban Institute’s Education Data and Policy Center, argued that borrowers with a bachelor’s degree “most likely worked remotely and missed nothing and lost no income.”
But Baum told The Hill that while many borrowers have “income that can pay off their loans,” others do not, referring to students who attend defunct schools and those with permanent disabilities.
She and Kantrowitz also acknowledged the need for officials to address racial disparities in student loan numbers.
“Black student debt is a huge problem because black students disproportionately come from families, not only from lower income earners, but from lower wealth,” Baum said.
Labor market discrimination is also a major factor, she said, noting that black bachelors degree holders continue to earn less than their white counterparts, despite having the same skills and qualifications.
The Education Department noted that Biden extended the moratorium on federal student payments as “much needed relief” for borrowers when asked about the impact of high inflation on borrowers.
The department pledged to assist the borrowers when the payments resume.
“With the resumption of payments, the department will focus on making sure that no borrower is forced to make a payment that they cannot afford by helping borrowers to enroll in income-driven repayment plans or take advantage of other options to address financial hardship,” a ministry spokesperson said. .
While cash-strapped borrowers or those working in certain positions in the public service may be able to enroll in forgiveness or repayment programs, those who don’t will face another hurdle in higher prices.
When a White House official was asked about rising inflation and its effect on borrowers, he referred to Biden’s plan to cut prices by going after meat manufacturers and directing the largest oil reserve release in history.
“The president knows what kind of pressure he can put on working families, which is why he’s using every tool at his disposal to bring these prices down,” the official told The Hill.
However, these efforts may take months – if not years – to achieve lower prices and only in certain sectors of the economy. Economists say Biden has little direct ability to solve the tangled problems in the supply chain, employment challenges and pandemic hurdles that drive inflation soaring.
The Fed is also preparing to start raising interest rates to cool inflation as soon as possible in March. But even low inflation will still leave cash-strapped borrowers staring at high prices.
Natalia Abrams, president and founder of the Center for Student Debt Crisis, has argued that working to waive student loans is how the president can help Americans through rising inflation.
“One of the best ways to bring prices down for families and for borrowers is to cancel student debt and beyond, to keep stopping until we really get out of this pandemic,” she said.