As the inflation crisis continues, former Secretary of the Treasury Larry Summers for the Obama and Trump administrations condemned President Biden’s decision to extend the student loan moratorium, saying it will further worsen inflation.
“The Administration’s postponement yet again of student debt payments is very hard to understand on policy terms,” Summers said on Twitter. “Wherever one stands on student debt relief this approach is regressive, uncertainty creating, untargeted and inappropriate at a time when the economy is overheated.”
“This is not a small macroeconomic thing,” he continued. “At a time when the economy is overheating… student debt action will be injecting money into the economy at a 100billion a year annual rate. This is a macroeconomic step in the wrong direction.”
The Administration's postponement yet again of student debt payments is very hard to understand on policy terms. Wherever one stands on student debt relief this approach is regressive, uncertainty creating, untargeted and inappropriate at a time when the economy is overheated.
— Lawrence H. Summers (@LHSummers) April 5, 2022
After Biden previously extended the moratorium, Summers similarly warned that it would worsen inflation.
“Judged purely in terms of economic impacts, the Administration’s decision to extend student loan moratorium is highly problematic,” Summers tweeted at the time. “At a time when unemployment is unusually low and household balance sheets are very strong for all income quintiles, there is no special case for across the board relief now, unlike when it was put in place two years ago.”
“The student debt relief is highly regressive as higher income families are more likely to borrow and to borrow more than lower income families. Adults with student loans have much higher lifetime incomes than those without,” he said. “Often relief is indirectly benefitting high interest lenders, like credit card companies, who get paid back with funds saved on account of the moratorium on student debt payments.”
“Relief also promotes spending in the near term when the economy is clearly supply constrained thereby [contributing] to inflation pressures,” he added.
