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APRIL

**6, 2022**

Dayen on TAP

You Could Just Never Resume Student Loan Payments

If President Biden wants to avoid mass student loan defaults, he can
cancel the debt.

****

The Biden administration has succumbed to the inevitable once again,
extending the payment pause on student loans
,
this time until August 31. As that date is a little more than two months
before the midterms, there's almost no chance the pause will be
allowed to expire then, unless Democrats are competing to devise the
best act of political malpractice in one election cycle. (Which they
may be
!)

This is the sixth time since the payment pause was hurriedly instituted
at the onset of the pandemic that it's been extended. We're
experiencing serious economic headwinds thanks to inflation, and
there's always the possibility of another COVID mutation

leading to mass sickness and economic shock. But we can be honest and
say that the pandemic case for the payment pause has passed, amid 3.6
percent unemployment and two years of surging economic growth.

No, the reason to pause student loan payments is more straightforward
than any emergency measure: We've paused them for two years without
many problems. Moreover, the chaos that a resumption of payments would
occasion shows how unsustainable the system was in the first place. It
all could be easily avoided by canceling the debt.

President Biden's statement

on extending the pause exemplifies this. He boasts about the nearly
eight million jobs created on his watch, and the fastest growth in 40
years, but adds: "If loan payments were to resume on schedule in May,
analysis of recent data from the Federal Reserve suggests that millions
of student loan borrowers would face significant economic hardship."

That's not a function of ongoing pandemic disruption, however; it
merely reveals that 40 million borrowers dealing with high debt levels
and creaky and at times malevolent payment programs and servicers will
just naturally lead to delinquencies and defaults. It's unavoidable,
and we know this because default rates were spiking before the pandemic
, a time of similarly
low unemployment and solid growth.

No amount of time will "prepare" student borrowers earning modest pay
with no savings to handle a large monthly debt payment. And the
continued stop and start of the payment pause will likely lull student
loan servicers into not adapting their systems in anticipation of
expiration. They will likely be caught off guard whenever it does
expire, leading to a mess.

Advocates for canceling student loan debt

were doing so way before anyone learned the word "coronavirus." It
wasn't a pandemic-induced crisis, but a crisis in and of itself. If
the president is concerned about student loan defaults, ruined credit,
shattered financial lives, and the economic implications of young people
finding large purchases like homes and cars impossible because they
carry too much debt, he has one option: cancellation. It has the added
benefit of fulfilling a campaign promise
.

~ DAVID DAYEN

Follow David Dayen on Twitter

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& BASMA HUMADI

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