Student loan break extended. Next stop, rejection?

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The extension of the eviction moratorium benefited from an outside game in which Rep. Cori Bush (D-MO) led a sit-in on the steps of the Capitol. The extension of the student loan payment hiatus announced on Friday had a lot more to do with an inside game played by Squad member Rep. Ayanna Pressley (D-MA) and Sens. Elizabeth Warren (D-MA) and Chuck. Schumer (D-NY) was listed. Press conferences, hearings, letters and lobbying by these three supported the activists’ efforts to prevent the resumption of payments in late September.

That would have created strong economic headwinds. The disbursement of student loans was not discussed in the same breath as economic stimulus packages or extended unemployment benefits, but it has just as much to do, if not more, with the positive economic situation and the personal savings rate. Around 42 million federal borrowers haven’t made payments on their student loans in the past 17 months, and the education ministry’s announcement will hold them back for another five months. Assuming an average payment of $ 393 per month, this will come to an effective benefit of $ 363 billion by next January, almost the same value as the one-time checks sent to $ 171 million as part of the US bailout were sent.

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The student loan break is for those who bear the loans, and by January they will have saved an average of $ 8,646. This has allowed some borrowers to pay off their loans in full: around 2.5 million, according to the credit service providers. It has also given borrowers time to find out the loan waiver and modified repayment programs that they could access. Also, the booming demand for goods and services during the pandemic has a lot to do with this hiatus, as student borrowers have more cash in their pockets.

That’s why it would have been so tedious to dismantle it in September. With nearly 6 million more unemployed Americans than before the March 2020 coronavirus outbreak in the US, withdrawing tens of billions from the economy each month would have dampened demand and affected the nature of discretionary spending on restaurants and travel that has been most of the time so far took to return from the recession.

While many members of Congress rejoiced at the extension of the payment pause and asked Biden to continue with the cancellation, House spokeswoman Nancy Pelosi has cornered herself on the matter.

The quieter reason the Biden administration decided to extend the payment hiatus is because two large student loan service providers that manage nearly 10 million accounts have gone out of business in the past few months. The hiatus will give the Department of Education more time to transfer these accounts and address numerous other shortcomings in the student loan system, such as forgiveness.

The administration is similar to the eviction moratorium signals that this last extension of the payment pause would be the last. “This final extension gives students and borrowers the time they need to plan the reboot and ensure a smooth path back to repayment,” Education Minister Miguel Cardona said in his announcement.

Some have complained that extending the break only kicks the can out on the street. There was a material advantage, however. With interest rates reset to zero during this period, borrowers have already saved $ 72 billion in interest by July, with more to come.

Perhaps the greatest real benefit of the payment break, however, was to prove the concept that the Department of Education has the power to change the terms of student loan payments at its own discretion. If the ministry can suspend payments for 22 months using the powers assigned to it in the Higher Education Act, it can also use those powers to cancel the student debt.

The administration has announced that the Ministry of Education and the Ministry of Justice are reviewing the law enforcement agencies to cancel the students’ debts. All you have to do is review the order that extends the payment pause. There is no difference between the two. The Debt Collective, an activist coalition, has gone so far as to write the executive order that precisely identifies the “compromise and settlement” agencies in the US Code that are available to the executive branch to discharge these debt obligations.

While many members of Congress rejoiced at the extension of the payment pause and asked Biden to continue with the cancellation, House spokeswoman Nancy Pelosi has cornered herself on the matter. they agreed to the pause in payment, but on July 28, Pelosi stated in no uncertain terms that Biden had no authority to cancel student debt, arguing that “the President can only postpone, delay, but not forgive”.

Pelosi spokesman Drew Hammill stated that her response was “based on the analysis of the president’s authorities by their staff” and that if the president found another authority, they would support it. However, it has been speculated that Pelosi got this idea from their longtime confidante and financial supporters Steven and Mary Swig, whose organization Freedom to Prosper argued the same thing in a two-page briefing to Congress.

The letter claims that by canceling student debt, the Department of Education is violating the Anti-Deficiency Act, which prohibits the executive branch from spending money that Congress has not appropriated. It is an odd leap to argue, but it is also wrong, as Sen. Warren pointed out on her own behalf. Congress has, through the Federal Credit Reporting Act, “already used the money on federal student loans … Also, Congress delegates the Secretary of Education the discretion to administer the student loan program.

But the most reasonable reason to assume student debt relief is legal is that the exact same authority is used that is used to pause payments. The same part of the US Code that allows the “time of payment of an installment” to be changed also allows the ability to “compromise, relinquish, or dismiss” any claim to payment. The claim that one is legal and the other is not leads Pelosi into an absurd cul-de-sac. Does she think the Department of Education could suspend payments for 100,000 years but not cancel the debt?

Some have argued that student debt relief would reward wealthy, cosmopolitan college graduates at the expense of poorer Americans. This perspective neglects the real burden of student debt. For example, households with black college graduates have seen a decline in net wealth since the 1990s, and this is almost entirely due to the increase in student debt. Over 84 percent of black households with someone in their thirties with a college degree have student debt, compared to 53 percent of similar white households. Student debt has exacerbated the racial wealth gap. And if you expand to households with uncompleted debt, you add many poorer households who would benefit from being given notice. Student debt relief would indeed be progressive and not a godsend for wealthy college graduates. And it would finally force policymakers to overhaul the way we fund higher education in America.

We now have five months until the Biden administration decides on the rejection. You have the economic motives, the political options, and the moral means to achieve this. The government is already using the authority to resign and has been doing so for almost two years. Tens of millions of debtors are waiting.

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