One Way Out Of The White House Political Box On Student Debt

By David Dayen, The American Prospect

Joe Biden’s plan to cancel some student debt for everyone and extinguish the full balance for nearly half of all federal borrowers is the culmination of years of activist work. When we published our explainer that the president could cancel federally held student debt in 2019, many policy wonks tried to throw up reasons why it couldn’t happen. They lost the battle inside the White House, thankfully.

But the White House still has a political problem. Federal student debt payments have been suspended since the beginning of the pandemic, and in its announcement the administration said that pause would be extended one final time until the end of the year. That means that in January 2023, 23 million borrowers will start having to make a payment that has been on hold since March 2020.

This is unquestionably going to create a political backlash. It’s hard to use the pandemic justification for the payment pause three years out, but the fact remains that 23 million Americans will get a bill for an average of $393 per month, and have to find a way to fit that into their budget for the first time in almost three years. They’re going to be angry about it.

Relatedly, to make those payments and avoid default or wage garnishment, they’re going to have to reduce their discretionary spending elsewhere. That means that while the government is getting student loan payments again, restaurants and department stores and other goods and services will probably see slower sales. For an economy already moving into slow growth or even a recession, thanks to the diligent work of the Federal Reserve, that’s a serious economic problem that will also resonate politically.