Time to bite the bullet: Restart payments on paused student loans

More than 45 million former students are drowning in student loan repayment obligations that now double credit card debt and total more than $1.5 trillion.

Progressives have called for universal loan forgiveness and the Biden administration – mindful of the hardships – has shown an openness to the idea, albeit on a limited basis.

But they are also mindful that tens of millions of Americans are struggling with other forms of debt for which there is not a federal remedy, including mortgages, car loans and credit card debt.

They also consider that students signed up for this debt in exchange for a higher education degree, one that will enhance their earning power and quality of life.

How temporary is this student loan pause?

Some 30 months ago, in response to these considerations and in lieu of full loan forgiveness, the federal government used an emergency measure to temporarily pause monthly student loan payments – regardless of income – for millions of Americans across the country, including an estimated 900,000 in Arizona with more than $30 billion in debts.

This measure softened the economic pain caused by the COVID-19 pandemic and gave borrowers a window of time to address their budgeting and financial pressures. It has been extended multiple times since.

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Is temporary really temporary?

As with any government program, the longer it lasts the more difficult it is to undo, notwithstanding its intended temporary design. Beneficiaries become reliant on it and invested constituents plead for permanence. A recurring pause becomes loan forgiveness by another name.

The president’s big federal investments have achieved record low unemployment, small businesses resurgence and climate mitigation. They will build new infrastructure in every state. But these expenditures have also fueled additional debt and inflation.

Time to make much-needed spending choices

Spending choices must be made.

The student debt moratorium, which has now been in place since March 2020, is costing taxpayers, including Arizonans, more than $11 billion each and every quarter.

So, how should we prioritize overall federal spending – and even more narrowly within higher education? I believe we need to focus on those most in need.

The blanket repayment pause is highly regressive. Two-thirds of student debt is owed by those in the top quarter of income. These high-income earners are getting their repayment commitment relieved at taxpayer expense when the real goal of the program was to relieve pressure on those facing severe hardship.

Loan forgiveness is also unfair to people who skipped college to enter the workforce early who are now funding the liabilities of the more affluent. All while the national income gap continues to widen.

Prioritize help for those who need it most

So, what to do?

Means-test repayment.

The pause is next scheduled to end at the end of this month, and the White House held many meetings on this issue last week with a decision imminent.

Congress should urge the administration to honor this date and simultaneously assign the Department of Education to redesign loan repayment relief targeted to those in most distress.

The president should then prioritize higher education dollars for increasing Pell Grants that increase access to deserving lower income students.

Resumption of payment obligations will never be easy or popular, but will become ever more difficult if the Federal Reserve continues to raise interest rates. It is time to bite the unpopular – but responsible – bullet now.

Fred DuVal is an Arizona civic leader, member of the Board of Regents, a former gubernatorial candidate and former senior White House staff. He is a regular contributor to The Arizona Republic. On Twitter: @FredDuVal.

This article originally appeared on Arizona Republic: A temporary pause on student loan repayment has gone on long enough