Revisiting Student Loan Forgiveness

Federal officials have extended the pause on student loan repayment.

On April 6, President Biden announced an extension of the "student loan pause" until Aug. 31. In other words, that means those who still owe a balance on their Federal Student Loans can hold off on making any payments until then. According to the Washington Post, that’s the sixth such extension since the pause came into play as a result of the pandemic (NPR says it’s the seventh).

The Post further reports that there are "about 41 million people" — that’s roughly 12 percent of the current U.S. population of more than 332 million — in this pool, who have accumulated a whopping $1.61 trillion of such debt. Wow: I’m amazed!

That’s A Lot of Moolah, Eh?

On the face of things, it seems like government regulators would want to collect as much of the outstanding balance as possible. But a little rumination, and some digging into recent history shows that ain’t necessarily so. In fact, President Biden campaigned on a platform that included cancellation or forgiveness of most or all student debt.

The Post story also quotes the April 6 announcement as follows: “The administration also said it will help 7.5 million people [about one-sixth of the loan pool’s population] exit default on the federal student loans, sparing them from the seizure of wages, tax refunds, and Social Security benefits.”

To me this puts the benefit of loan forgiveness into stark relief. The people least able to repay their student loans — those either marginally employed or underemployed, those on disability (perhaps including Social Security payments), those approaching (or already into) retirement — are the ones who will benefit most from easing of their financial obligations.

There are many labor economists who have observed that minorities and other marginal groups have also been more likely to take on student debt to help lift themselves out of poverty. At the same time, the well-known issues with such people finding jobs, especially jobs that pay a living wage, is also well documented.

The Last Shall Be First, and the First Shall Be Last

Federal officials have extended the pause on student loan repayment.

The old saying has it that "a rising tide floats all boats." The same principle is true for loan forgiveness, in that it improves fortunes of all those who benefit from such amnesty. But those on the margins, and those who earn the least must also struggle the most to repay such debt.

Its forgiveness is particularly valuable and important because it provides a correspondingly higher lift to those living at (or below) the edge of poverty. President Biden’s promise of federal student debt forgiveness has yet to materialize, but this extension provides at least another four months of welcome relief.

Another story on the same topic, also on April 6, from Cory Turner at NPR includes some additional and interesting observations:

Senator Patty Murry (D-Wash) called in a Tweet for the pause “to be extended until at least 2023” based on “rising costs and still building back from the pandemic.”

Abby Shafroth of the National Consumer Law Center said “the pause is a temporary measure that should be in service of a longer-term fix, or borrowers may be back in the same crunch four months from now.”

President Biden, while campaigning, promised to cancel at least $10,000 for each borrower in the Federal Student Loan program. Thus far, no such cancellation have been are forthcoming. The administration is likewise mum on future prospects for cancellation. With elections upcoming, this could easily become a hot-button issue.

Personally, I’d like to see our president make good on his promise, and soon. Even better would be to apply means testing to those with outstanding Federal Student Loan balances, and to offer forgiveness of some or all of such debt. Those who need the relief would benefit most.

I can’t help but believe it would ultimately benefit the entire economy, as those who’ve struggled to make ends meet can do so better. Ultimately, that should mean they’d pay more taxes and help make up the difference over time anyway. And in that scenario, everybody wins.

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About the Author

Ed Tittel is a 30-plus-year computer industry veteran who's worked as a software developer, technical marketer, consultant, author, and researcher. Author of many books and articles, Ed also writes on certification topics for Tech Target, ComputerWorld and Win10.Guru. Check out his website at www.edtittel.com, where he also blogs daily on Windows 10 and 11 topics.