This is the sixth time the Department of Education has extended the student loan repayment suspension, which began in March 2020 and will run through June 2023.
According to the Committee for a Responsible Federal Budget, the repayment halt, which presently costs around $5 billion each month, could cost $275 billion if continued through the end of 2024.
“Every time we extend this, it’s going to worsen the inflation outlook,” Marc Goldwein, senior vice president of the Committee for Responsible Federal Budget, told the DCNF. “It’s going to worsen our fiscal outlook. And it’s going to further undermine the credibility of the higher education financing system. In late 2021, it was unnecessary, at this point its downward damaging.”
As currently proposed, extending the pause until August 2023 will cost $195 billion. According to the Committee for a Responsible Federal Budget, the extending of the pause may dramatically boost inflation, perhaps leading the Federal Reserve to raise interest rates and adding to recessionary pressures.
EJ Antoni, a research fellow for Regional Economics at the Center for Data Analysis at the Heritage Foundation, told the DCNF that the most recent extension will impose more costs on taxpayers.
“Despite repeatedly promising not to extend the moratorium, much like Lucy promising not to pull the football away from Charlie Brown, Biden has yet again broken his word and announced the eighth extension of the moratorium,” Antoni told the DCNF. “The pause on payments is now extended potentially through August 2023, 42 months after it began in March 2020. By the end of August, the lost interest payments alone will have cost taxpayers $210 billion. This perpetual moratorium is an end run around the courts, which have ruled Biden’s student loan bailout unconstitutional because no one has to make payments.”
This is the fourth time since March 2020 that the repayment moratorium has been extended. The prolongation of the repayment suspension is a result of the Department of Justice’s request to the U.S. Supreme Court to reverse a lower court’s order that blocked the student loan forgiveness program from proceeding.
In August, the Department of Education unveiled a plan to cancel up to $20,000 in student debt for Pell Grant recipients and up to $10,000 for individuals earning less than $125,000 annually.
The U.S. Eighth Circuit Court of Appeals suspended the student loan forgiveness program on October 22, preventing the government from “discharging any student loan debt.”
The DOE replied by stopping the application for student debt forgiveness on November 12; nonetheless, the DOE has began sending approval emails to applicants for student loan forgiveness.
“Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations, and it’s just plain wrong,” Secretary of Education Miguel Cardona said in a news release. “I want borrowers to know that the Biden-Harris Administration has their backs and we’re as committed as ever to fighting to deliver essential student debt relief to tens of millions of Americans.”
Goldwein told the DCNF that if the Biden administration continues to extend the repayment freeze, students may take out additional loans because they feel they may never have to pay them back, which might generate greater issues.
“The longer this goes, I think the more people are gonna start to question whether they’re ever going to pay back their debt,” Goldwein said. “At some point, it’s probably going to cause people, if it isn’t already, to take out more debt than they otherwise would in hopes that at least they’ll get some of the interest canceled. That’s problematic because when we start to have a higher debt burden, it also probably changes incentives for colleges.”