Chief economist slams Biden’s ideas to put student loans on hold
Brian Wesbury explains the potential consequences of the president’s idea, and discusses how the administration is giving people incentives not to work on ‘Making Money’
A group of Democrats on Tuesday renewed their pressure on President Biden to use his executive authority to cancel billions of dollars in student loan debt and extend a moratorium on payments that's poised to expire in September.
During a Capitol Hill news conference, Senate Majority Leader Chuck Schumer; Sen. Elizabeth Warren, D-Mass.; and Rep. Ayanna Pressley, D-Mass., warned the U.S. economic recovery from the pandemic could otherwise be endangered if Biden does not take delay the federal government's pause on student loan payments until the spring.
"People were thrown off their stride by COVID. Give them a chance to recover, wait until the spring," Schumer said, adding: "Resuming these payments could stall our country's economic recovery. It could bring millions of loan borrowers to the edge of the student debt crisis."
CANCELING STUDENT LOAN DEBT WOULD BE INEFFECTIVE AT BOOSTING THE ECONOMY, STUDY SHOWS
The Education Department has provided about $72 billion in relief on student loan interest alone, the lawmakers said. About 41 million Americans are benefiting from the federal government’s pause of student loan payments, which began in March 2020 and was twice extended.
A coalition of 64 lawmakers previously asked Biden to take action before the Sept. 30 deadline when the loan forbearance period officially and requested he extend the pause until March 31, 2022, or until the economy returns to its pre-crisis levels – whichever is longer.
"Over 30 million Americans will have a bill coming due in about two months," Warren said Tuesday. "The payment pause is running out on student debt payments. The size of these payments is the size of their rent, their car payment, groceries, child care. That's going to put a lot of people making hard choices."
CANCELING STUDENT LOAN DEBT COULD BENEFIT WEALTHY AMERICANS THE MOST
Schumer, Warren and Pressley also called on Biden to cancel $50,000 in outstanding federal debt per borrower via executive order. The Democrats have maintained that Biden could use existing executive authority under the Higher Education Act to order the Department of Education to "modify, compromise, waive or release" student loans.
"All President Biden has to do is flick his pen and sign it," Schumer said. "Make America a happier, better, more prosperous place. We're going to keep fighting until this happens."
Such sweeping executive action by Biden would almost certainly face a legal challenge, and it's unclear whether it could survive. Critics have argued that using such power exceeds the president's authority granted by Congress.
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Biden campaigned on canceling billions of dollars in student loan debt but has so far erased just a fraction of the pledged amount for about 72,000 borrowers, drawing ire from some progressive lawmakers who want him to move further left on the issue.
Outstanding student loan debt has doubled over the past decade, nearing a staggering $1.7 trillion. About one in six American adults owes money on federal student loan debt, which is the largest amount of non-mortgage debt in the U.S. It has been cited as a major hindrance in people’s "economic life" by Federal Reserve Chairman Jerome Powell.
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