Loan payment

Resumption of student loan repayments could slow economic recovery, Democrats say

THROUGH Sydney Lake14 December 2021, 18:34

Senate Majority Leader Chuck Schumer (D-NY) speaks at a student debt press conference outside the United States Capitol on February 4, 2021 in Washington, DC. Also pictured are LR, Representative Mondaire Jones (D-NY), Representative Alma Adams (D-NC), Representative Ilhan Omar (D-MN), Senator Elizabeth Warren (D-MA) and Representative Ayanna Pressley (D-MA). (Photo by Drew Angerer — Getty Images)

Only 49 days left until the forbearance on student loan payments ends, but many top Democrats aren’t fighting to extend the moratorium except President Joe Biden likely disagrees with that, according to her press secretary Jen Psaki. .

Democrats including Senate Majority Leader Chuck Schumer, Senator Elizabeth Warren and Representative Ayanna Pressley continue to push for a continued stay for student loan borrowers – and now they say resuming payments could be damaging to our post-COVID economy recovery.

“The resumption of federal student loan repayments … will remove more than $ 85 billion from approximately 18 million American families over the next year,” Schumer, Warren and Pressley wrote in a letter of December 8 in Biden. “In order to prevent the student debt crisis from slowing our economic recovery… we urge you to extend the pause on student loan payments and interest and take action to cancel student debt. “

Schumer, Warren and Pressley cite an analysis by The Roosevelt Institute, an American liberal think tank. The letter cites that the average borrower paid $ 393 per month for their student loans. The Roosevelt Institute analysis calculates that about $ 85 billion will be taken from the budgets of more than 18 million student loan borrowers if loan collections resume.

It is “money that could not be spent on other family needs,” they write in the letter. “These payments hurt individual families and the economy as a whole and will have a significant negative effect if the administration ends the payment hiatus as planned.”

But is this evidence enough to push Biden to extend the freeze?

Biden said there would be no more extensions

In early August, when the freeze on federal student loan payments was pushed back for the fifth time, Biden, officials at the White House and the Department of Education said it would be the final extension. The freeze first came into effect with the passage of the CARES law in March 2020.

Psaki confirmed on Monday that there will be no further extension of the student loan forbearance and that payments will resume on February 1, 2022.

“We are still evaluating the impact of the Omicron variant, but a smooth transition to reimbursement is a high priority for the administration,” she said. said at a press conference. “The Department of Education is already communicating with borrowers to help them prepare for the return to repayment on February 1. “

Will the repayment really have an impact on the economy, as Democrats argue?

Schumer and other leading Democrats argue that student loan debt places an unnecessary burden on borrowers.

“For more than 2.4 million New Yorkers, tens of millions of Americans, student loan repayments are a huge burden on them,” Schumer said at a press conference. December 6 press conference. “And, unfortunately, the pause that says you don’t have to pay them during the pandemic goes away by the end of January.”

The letter also shows that abstaining from student loans has “improved the economic security of borrowers, allowing them to invest in their families, save in emergencies and pay off other debts.”

Laura Veldkamp, economist and professor of finance at Columbia Business School says that “now is the perfect time to resume payments.” CBS is ranked as having the # 6 full-time MBA program in the United States

“The economy is overheating. Employers are begging for workers, ”she says Fortune.. “Anyone who wants a job should be able to find something. Unless we face another widespread shutdown, it’s good for the economy to pick up, good for students not to let their debt drag on, and will encourage lenders to continue lending to new students at reasonable rates. “

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