As the Biden administration readies its fifth extension of federal student loan repayments, voter concerns over surging inflation take a back seat to the needs of Democrats’ donor class in the run up to the midterm elections.
The current student loan moratorium is set to expire on August 31, leaving the Democrats with the prospect of student loan payments resuming just two months out from an election. Democrats are almost certain to extend the moratorium again.
The student loan “pause” begin in March 2020. Yes, two-and-a-half years ago.
This policy has been a disaster: costing taxpayers nearly $135 billion while primarily benefiting the elite and contributing to the highest inflation in 40 years.
Recently a group of 180 left-of-center organizations signed a letter urging President Biden to extend the moratorium on student loan repayments. They insisted that the moratorium be extended until the administration fulfills its promise to cancel student loan debt.
This letter is filled with delusional, out-of-touch arguments that perfectly illustrate the Left’s understanding of the student loan issue.
The primary assertion by these groups is in the letter’s one bolded line: “People with student debt cannot be required to make payments toward loans your administration has promised to cancel.”
Ironically, the Left is arguing that a politician’s “promise” while on the campaign trail should be more binding than the contractual agreement borrowers signed promising to pay back their debts.
The signers also describe the moratorium and cancellation as a way to relieve the financial pressure of inflation on Americans, especially “economically vulnerable” people, people of color, and women. This, of course, is just part of the Left’s strategy to frame every policy goal of theirs as “justice” for the destitute and oppressed. This kind of framing for the student loan issue is especially shameless, though, as the student loan moratorium primarily benefits white, wealthy elites while worsening inflation for low and middle-income Americans.
About 75 percent of student loan repayments come from the top 40 percent of earners. The bottom 20 percent of earners only pay 2 percent of monthly student loan payments. As the Committee for a Responsible Federal Budget points out, the effects of the student loan moratorium is even more skewed toward elites than a blanket cancellation, as graduate student loans tend to have higher interest rates than undergraduate loans.
The Brookings Institution, whose scholars generally support student loan cancellation, described those who would benefit most from student debt forgiveness as “higher income, better educated, and more likely to be white.”
Adam Looney, a former economic advisor to President Obama, explained that, “Measured appropriately… loan forgiveness is regressive whether measured by income, educational attainment, or wealth. Across-the-board forgiveness is therefore a costly and ineffective way to reduce economic gaps by race or socioeconomic status.”
This is not very surprising. As one might assume, many low-income Americans chose not to go to a four-year, private university. Many paid their way through community college or a public university/college, went to trade school, joined the military to pay for their education, or went straight into the workforce after high school. For these Americans, the moratorium and cancellation proposals are slaps in the face. If student loan debt is cancelled, their sacrifices and hard work was futile.
Further, the letter’s assertion that student loan handouts could help ease the financial pressure of inflation on Americans is especially misguided. About 45 million Americans, or 17 percent of the adult population, have federal student loan debt. While this limited group of Americans, who already skew higher-income, may experience relief, every American is facing crippling inflation.
The consumer price index increased by 9.1 percent on an annualized basis in June, according to the Bureau of Labor Statistics (BLS), setting yet another 40-year high for the sixth time under President Biden.
A primary cause of inflation is the government’s reckless spending. The federal government is flooding the economy with so much money that demand is growing too fast for production to keep up. The moratorium on student loan repayments has been incredibly expensive: so far, it has costed taxpayers $135 billion, and continues to cost them an additional $5 billion each month.
While the Left has attempted to frame the student loan issue as one pertaining to “racial and economic justice,” it is simply a handout to the liberal elite. Lawmakers cannot allow the Left to worsen inflation for average Americans under these false pretenses.
Isabelle Morales is Policy Communications Specialist at Americans for Tax Reform.