Did You Know? Student Loan “Pauses” Help Those Who Can Afford to Pay | Eastern North Carolina Now | At the outset of the COVID-19 pandemic, policymakers implemented sweeping relief programs to offset the economic shock of lockdowns, layoffs, and shifts in consumer behavior.

Coronavirus Disease 2019 (COVID-19)
    Publisher's Note: This post appears here courtesy of The James G. Martin Center. The author of this post is Harrington Shaw.

    At the outset of the COVID-19 pandemic, policymakers implemented sweeping relief programs to offset the economic shock of lockdowns, layoffs, and shifts in consumer behavior. Among these actions was a provision for the blanket forbearance of student loan debt for 42.3 million borrowers.

    Despite the well-intentioned nature of such "payment freeze" policies, little was initially done to study their effectiveness. However, a recent report from the Consumer Finance Institute (CFI) at the Federal Reserve Bank of Philadelphia indicates that the needs of struggling borrowers have not been met.

    According to the CFI, this is because borrowers' inability to make payments was primarily a result of insufficient income and employment opportunities rather than the "transitory labor market and income shocks that occurred during the pandemic."

    Lawmakers' stated objective for the (ongoing) payment freeze was to provide borrowers with time to pay down other debts and build savings, so that student loan payments could be resumed after the pandemic. However, the CFI found that only 16 percent of borrowers cited paying other debts and building savings as reasons for previously neglecting student loan payments. 67 percent of those not making payments said that their failure to pay was due to an inability to afford the bill.

    It appears, therefore, that borrowers' inability to make payments is not a result of pandemic-related financial turmoil but, rather, a poor return-on-investment from their college degrees. Perhaps focus should shift away from payment freezes (or outright debt "forgiveness") and toward holding accountable those colleges that are not preparing their graduates for jobs that provide sufficient income for student debt financing. As the CFI states, "chronic repayment struggles are primarily the result of education debt that did not lead to income and employment outcomes to support that debt."

    Yet, rather than pursue a policy of accountability, officials have opted to renew blanket forbearance six times thus far, despite the fact that three-quarters of the borrowers who were making payments before the pandemic likely never needed their loans frozen. According to the CFI, "blanket forbearance extensions are costly and benefit the majority of borrowers who neither expect to struggle with their payments when the payment pause ends nor appear to be shoring up their savings or paying off other debts."

    What the CFI's data reveal is that student loan debt forbearance is a costly policy that neglects the root causes of the plight of those with chronic repayment struggles. Simultaneously, it unnecessarily relieves those who are able to pay, at the expense of taxpayers.

    After reviewing its own findings, the CFI recommended that, in the future, the Department of Education "substitut[e] more grant aid for student loan aid for low-income students [and strengthen] the design, implementation, and adoption of effective income-driven repayment plans." Yet, while these reforms may prove to be less wasteful than blanket forbearance, they still fail to address the underlying issues of skyrocketing tuition and insufficient career preparation.

    In sum, the ongoing freeze of student debt payments (and the Biden administration's forthcoming partial "cancellation" of that debt) are not solutions to the student debt crisis. Rather, they are expensive and misguided policies that only delay our reckoning with the real underlying crisis.

    Harrington Shaw is a summer '22 intern at the James G. Martin Center for Academic Renewal and a rising junior studying economics and philosophy at UNC Chapel Hill.
Go Back

HbAD0

Latest Op-Ed & Politics

A federal Appeals Court will not block the N.C. Green Party from appearing on the general election ballot.
Famed neurosurgeon Ben Carson, who served as former President Trump’s secretary of Housing and Urban Development, blasted the FBI raid on Trump’s Mar-a-Lago home on Monday, comparing the action to those of infamous communist tyrants Mao Zedong and Fidel Castro.
Sen. Tom Cotton (R-AR) addressed the Biden administration’s latest controversy, flying illegal aliens across the U.S. in the dead of night, by saying that the administration was desperately trying to avoid the public seeing what they are doing because it is a political disaster for them.
President Joe Biden’s Attorney General, Merrick Garland, announced Thursday afternoon that he personally approved the FBI search warrant on the home of former President Donald Trump this week and that the Department has moved to unseal the search warrant.
Ted Budd Validates the Charlotte Observer’s Reporting that Working Families are FREAKING OUT About How the Inflation Caused by Biden Policies Supported by Beasley are Crushing Family Budgets And, of Course, the TV Ad Reeks of Cinematic Excellence
Former Democratic presidential candidate Tulsi Gabbard ripped the Biden-Harris administration for statements she said promoted the use of puberty blockers for children.
N.C. Republican Congressional delegation outraged at FBI raid on former President Donald Trump's Mar-a-Lago home in Florida.
Virginia Democratic gubernatorial candidate Terry McAuliffe cut an interview short on Tuesday with a local news station after the interviewer asked McAuliffe questions that he apparently did not want to answer.
Inflation remains at a 40-year high, and while Congress prepares to spend hundreds of trillions of dollars more, families across North Carolina are struggling with the higher costs of getting their children ready to return to school.

HbAD1

Monkeypox cases continue to rise in New York City, prompting officials to declare a public health emergency on Saturday while estimating that approximately 150,000 Big Apple residents face possible exposure.
Its now indifferent to human suffering, to life and death
The “Inflation Reduction Act,” which passed the U.S. Senate on Sunday, is set to pass the U.S. House tomorrow, and the final version will not contain guarantees that those making under $400,000 per year will avoid any resulting new taxes.
Federal law enforcement officials reportedly “delivered subpoenas or paid visits” to several Pennsylvania Republican lawmakers this week following their raid on former President Donald Trump’s Florida residence at Mar-a-Lago.
Yuan, ruble and other currencies emerging as alternatives
Just more proof of how corrupt the FBI has become
U.S. Supreme Court Justice Clarence Thomas is no longer listed as faculty on George Washington University Law School’s website and will reportedly not teach at the Washington, D.C. school in the upcoming semester.
Former Vice President Dick Cheney, who famously started two wars in the Middle East and shot a dude in the face while hunting, now says Donald Trump is the greatest threat America has ever faced.

HbAD2

 
Back to Top