The notion that student-loan forgiveness is being weaponized by Democrats as a means of essentially buying the loyalty of an entire generation (or at least the upper-middle-class members of said generation) isn't anything new. Indeed, we have discussed it in detail as recently as late last month.
But despite this transparent attempt to curry favor with educated liberals (already the Dems political base), the Biden Administration is preparing to go back to the well once more during an election year.
After moving to forgive some student loan payments, the Biden Administration has yet again reportedly decided to extend its moratorium on student loan payments.
This time, the moratorium (which was previously slated to expire in May) will be extended through the end of August, just before Americans head to the polls for the midterm elections.
Here's more from Politico, which broke the news of the Administration's plans (an Administration insider later confirmed the plan to the AP):
The White House plans to once again extend the moratorium on federal student loan payments through the end of August, according to multiple people familiar with the matter, including an administration official.
The announcement, expected on Wednesday, comes as the current pause on payments was set to expire May 1, potentially impacting more than 40 million Americans. The new August 31 extension, however, is considerably shorter than what many Democrats have been requesting. It also tees up another fight over the relief just months before the midterm elections.
As Politico readily admits, this latest extension has a pretty obvious political dimension, thus improving Democrats' shrinking chances of hanging on to both houses of Congress. This fact will likely trigger backlash from Republicans, who started the moratorium under President Trump.
According to Politico, the administration has already given student loan servicers advance warning of the decision.
Biden administration officials had signaled in recent weeks that they were likely to extend the relief, telling federal student loan servicers to hold off on sending notices to borrowers that their monthly payments would be starting. The U.S. official pointed to Susan Rice, the president’s domestic policy adviser, as key in the negotiations securing the extension.
"Since the beginning of the Administration, she has advocated for each pause on the repayment of student loans, including this most recent one," the official said.
A range of Democrats had urged the Biden administration to extend the pause on payments through at least the end of 2022, which would be long enough to avoid requiring borrowers to make payments just before the midterm elections. Just last week, nearly 100 lawmakers led by Sen. Elizabeth Warren (D-Mass.) and Majority Leader Chuck Schumer sent a letter to Biden asking him to extend the pause “until at least the end of the year.”
While the White House is only preparing to extend the moratorium through August, a couple of Democratic senators are pushing for a much longer extension.
The Democratic chairs of the congressional education committees - Sen. Patty Murray (D-Wash.) and Rep. Bobby Scott (D-Va.) - had also urged the administration to extend the relief until 2023.
"Tens of millions of people with student debt are once again in limbo as Washington plays politics with borrowers’ financial lives,” said Student Borrower Protection Center Executive Director Mike Pierce. "Joe Biden needs to keep his promises to fix the broken student loan system and cancel student debt. As voters head to the polls in November, they will not settle for anything less."
Of course, that proposal looks tame compared to what progressives like AOC and her fellow "Squad" members have been lobbying for. If they had their druthers, an extended freeze would merely become a prelude to widespread student debt cancellation.
However, advisors on the more moderate end of the Democrats' political spectrum have warned that the decision to continue freezing payments could backfire for Biden and the Democrats, since it would muddle Biden's message about the strength of the economy.
Some Biden advisers have been reluctant to continue relief because they believe it undercuts the administration’s messaging on the strength of the economic recovery, though last month White House chief of staff Ron Klain signaled the White House would extend the freeze again.
While progressives love to characterize student loans as a "tax on the poor", the reality is far more nuanced. As we have pointed out before, Biden's hopes of forgiving tens of thousands of student loan debt per person would actually represent a major wealth transfer to the middle class.
Another progressive who implies that college degrees are not worth what students pay for them https://t.co/zAoaosFT0Z— Chuck Ross (@ChuckRossDC) April 5, 2022
Federal student loan payments were originally suspended by the Trump administration in March 2020 and extended through January 2021. Since then, the Biden administration has extended the deadline a handful of times, while Democrats have urged Biden to cancel some debt by executive fiat (which he has done, but in a much more limited scope than many probably would have liked).
Circling back to the moderate Dems' argument about the moratorium undermining confidence in the economy, pretty soon, the Dems may find that they have no choice but to continuously extend the moratorium due to the fact that the student loan bubble is already on the cusp of bursting. Some 36 million Americans who have student loans held by the federal government benefit from the moratorium.
Collectively, they owe $1.37 trillion according to the latest data from the Department of Education. Already, roughly one-third of borrowers are in default or delinquency, while the average payment stands around $400 per month.