Moratorium on student loan repayments likely to continue as Biden mulls loan forgiveness
PITTSBURGH (KDKA) — The moratorium on student loan re-payments comes to an end next week.
But as KDKA-TV money editor Jon Delano reports, many think President Joe Biden will extend the moratorium and perhaps forgive some loans at the same time.
At $1.6 trillion, federal student loan debt now exceeds American credit card debt or auto loan debt, but Alyssa Dobson, past president of the state's financial aid administrators, says student loans are essential.
"A lot of students wouldn't be able to pursue their educational goals without the student loans that are available again to anybody regardless of their income level," says Dobson.
While repaying those student loans has been suspended during the pandemic, that moratorium is set to end Aug. 31. Everyone expects it to be extended, but the White House would not confirm that on Monday, telling KDKA-TV, "The President knows firsthand how burdensome student loan debt can be on families, and this has been top of mind for him. No one has had to pay a single dime in student loans since President Biden took office."
So what about student loan forgiveness? More than half of those who borrowed for college owe less than $20,000.
"Most of us are hearing about a concept of about $10,000 being forgiven. I think that's going to be most beneficial to those students who have low loan balances, generally, they are students who attended for a semester or a year and they didn't finish the degree. So, they don't have the tools necessary to repay the loans," says Dobson.
President Biden has already canceled $31 billion in student debt and is making it easier to forgive debt for those who spend 10 years in a public service position like teaching or law enforcement.
The latest is a just-announced program called Fresh Start to help those who missed loan payments before the pandemic.
"It removes all of those negative consequences of default and allows you to become current again with your payments," says Dobson.
Most financial aid administrators expect an extension of the current moratorium.
"I can't confirm an extension, but what I can tell you is that myself and folks like me in higher education and financial aid are asking for that and recommending that they do another extension of the payment deadline," says Dobson.
As to whether Biden will cancel or forgive the first $10,000 of federal student loans, in response to KDKA-TV's inquiry, a White House spokesperson said, "This administration has already cancelled over $31 billion in debt for more than 1.6 million Americans. That's more than any administration in history. The president will have more to say on this before August 31."
Some economists worry canceling more student debt could add to inflation.
"How the government goes about paying for this forgiveness can impact inflation. What's been happening, at least since COVID, is that much of what the government has been spending in terms of deficits has been paid by the Federal Reserve printing money. That's what gives us the inflation," says Antony Davies, a Duquesne University professor.
But not everyone agrees, especially if it's limited to just $10,000 when the average student loan debt is now over $32,000 per person.
"I don't think it will have any kind of inflationary consequences at all," says Dobson.
Again, the White House would not say if the moratorium on repaying student loans will be extended beyond Aug. 31 or whether some student loan forgiveness is on its way.