Student Loan Forbearance—Forever?

Biden extends the debt moratorium again, and more may be coming

WSJ editorial. Excerpts:

"Mr. Biden said the economy is stronger than ever and the country can safely “return to more normal routines,” but student borrowers apparently still aren’t ready to return to making normal loan payments." 

"The unemployment rate for bachelor’s degree holders in March was 2%. Many borrowers have built a financial cushion from pandemic stimulus payments and the past two-year freeze on loan payments. Some have used the savings, which have averaged $400 per month, to pay off higher-interest debt or invest in stocks."

"the loan pause has cost taxpayers more than $100 billion"

"The extension will mostly benefit those who need it the least—higher earners with graduate degrees. By CRFB’s estimate, a new lawyer has already received $30,000 of debt cancellation due to interest cancellation during the pandemic and higher-than-expected inflation. Inflation benefits debtors by eroding the value of current debt balances.

Because graduate degree holders have much more debt, and their loans carry higher interest rates, they benefit most from the government forbearance. A recent master’s degree recipient has received on average $13,500 in relief, three to four times more than someone who just completed a bachelor’s or associate’s degree."

"delinquency rates for commercially-owned federal loans not covered by the pause fell early in the pandemic and then returned to pre-pandemic levels by the end of 2021. That’s not a catastrophe.

Private loan delinquencies have declined steadily throughout the pandemic as borrowers aided by several rounds of stimulus payments reduced their balances. But federal loan borrowers didn’t strive to pay down their debt. Why would they if their balances weren’t accruing interest?"

"Progressives are demanding that President Biden forgive at least $50,000 per borrower by executive order."

"What a way to stick it to Americans who didn’t attend college or who have diligently repaid their loans."