The Biden administration is reportedly planning to freeze federal student loan payments until August 31, extending a moratorium that was put in place at the beginning of the pandemic, a person familiar with the matter said, according to The Wall Street Journal.
The person said that the extension could be announced as soon as Wednesday.
“Payments and interest accrual have been paused for borrowers with federal student loans since March 13, 2020, at the start of the pandemic,” The Wall Street Journal reported. “The pause is currently scheduled to expire on May 1, following a 90-day extension that was announced as cases of the Omicron variant of Covid-19 surged last December.”
“About 40 million people owe around $1.6 trillion in federal student debt, a sum bigger than credit-card or auto debt,” the outlet added. “The pause on student-loan payments has lasted longer than most other economic relief measures instituted in the early days of the pandemic by Congress and the White House, such as a ban on evictions and enhanced unemployment benefits, both of which expired last year. This would be the fourth time that President Biden has extended the pause, after then-President Donald Trump extended it twice.”
The news comes as President Biden’s inflation crisis continues. According to former Secretary of the Treasury Larry Summers, extending the student loan moratorium will further worsen inflation.
“Judged purely in terms of economic impacts, the Administration’s decision to extend student loan moratorium is highly problematic,” Summers tweeted after Biden previously extended the moratorium. “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.