Recently, President Joe Biden was denounced by a former Obama-era economic adviser for his “vary hard to understand” pause on student debt repayment.
This past Wednesday, the Biden administration chose to extend the payment pause on federal student loans, effectively pushing back the return of student debt repayment from May 1st to August 31st. This is just one of several times in the past that Biden has chosen to delay the return of these student loan debt repayments with the most recent of which taking place back in December of 2021. In a release, Biden stated that this recent extension would “enable Americans to continue to get back on their feet after two of the hardest years this nation has ever faced.”
As a response to this choice, Lawrence Summers, who previously worked as the Treasury Secretary under the Clinton administration and the National Economic Council director while working under Obama, stated that any sort of low inflationary impact would hang upon the bill remaining at its currently slated cost level.
“The Administration’s postponement yet again of student debt payments is very hard to understand on policy terms,” stated Summers via 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.”
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
“This is not a small macroeconomic thing,” he went on. “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.”
Previously, Biden faced mounting pressure from top progressive lobbies, including such groups as the ACLU, the NAACP, and the American Federation of Teachers, in order to increase the length of the pause on federal student loan repayments. Back in December, 200 of these groups called out to Biden to press him to extend the already instated pause and cancel student debt outright.
“In fewer than 60 days, tens of millions of student loan borrowers are slated to be thrown back into repayment on federal student loans they are ill-equipped to pay as the deadly COVID-19 pandemic continues to devastate Americans’ health and financial security,” the group of organizations stated to Biden. “It is clear that payments should not resume until your administration has fully delivered on the promises you made to student loan borrowers to fix the broken student loan system and cancel federal student debt.”
The lobby groups called back to a campaign promise from Biden himself as the platform for their argument.
“You ran for president on the promise that you would reform the student loan system to ensure that student loan payments would be affordable for all. Your administration’s decision to extend the payment pause… are critical and welcome first steps,” they claimed. “Right now, your administration has the opportunity to continue repairing the damage caused by policy failures at the federal and state level and decades of government mismanagement and industry abuses — an opportunity and an obligation that must be fulfilled before any action is taken to resume monthly student loan payments.”