Photo by Charles DeLoye on Unsplash

The Biden administration must, once again, decide whether or not to extend the moratorium on student loan repayments. This policy has already cost taxpayers nearly $135 billion and will cost an additional $5 billion each month it continues. It is also fundamentally unfair, serves affluent elites, and drives already out-of-control inflation. The administration must resume payments.   

With the moratorium set to expire at the end of August, the President is deciding whether to extend the moratorium for a fifth time.

On the most basic level, this policy is unfair. 

It is unfair to the millions of Americans that did not rack up tens of thousands of dollars of debt. It is unfair to Americans that decided against attending college, opted for less expensive schooling, served in the military to receive free education, or have worked long hours to put themselves through school instead of going into debt. This policy is also unfair to those who were proactive in paying off their debt. All these sacrifices were made by people who could only work with the information they had: if they took out loans, they would be held to their contractual obligations.    

Despite Democrat talking points, the moratorium isn’t helping low-income Americans hit hard by the pandemic. This policy primarily benefits the wealthy.  

The Brookings Institution described those who would benefit most from student debt forgiveness as “higher income, better educated, and more likely to be white.” The top 20 percent of households currently hold $3 in student loan debt for every $1 of debt held by the bottom 20 percent of earners. About 75 percent of student loan repayments come from the top 40 percent of earners, as the Committee for a Responsible Federal Budget notes.  

In fact, this “issue” is hardly a low-income one at all: the median income of households making active payments on their student loans was $76,400, with just 4 percent of these households being below the federal poverty line.     

The moratorium is also contributing to high levels of government spending that exacerbates inflation and disproportionately harms low-income Americans. 

The moratorium has cost the federal government about $135 billion. Every month, the moratorium costs the government $4 to $5 billion.   

This is just one example of high federal spending. In 2020, the U.S. government spent over $6 trillion. In 2021, the U.S. spent $6.82 trillion, or 30% of the economy. The CBO projects that U.S. interest costs will triple within the next decade — from $331 billion this year to $910 billion in 2031, accounting for 12% of the entire federal budget. In 2021, the United States’ interest payments cost roughly $2,600 per household.     

Democrats maintain that these massive costs don’t matter because giving loan borrowers more money to spend will stimulate the economy.  

In reality, this plan would cost the government far more than it would provide stimulus. The Committee for a Responsible Federal Budget conducted an analysis which found that for every dollar the government spent on student loan forgiveness, as little as 3 cents and at most 27 cents of economic activity would be produced.  

This massive amount of spending worsens inflation. The federal government is flooding the economy with so much money demand is growing too fast for production to keep up.  

The results of these policies are clear. In July, inflation remained high at 8.5 percent. Inflation is now costing American households an extra $635 a month.  Even if prices stopped increasing altogether, the average American household will spend over $7,600 more this year due to inflation.  

The student loan repayment moratorium must end. It is not only regressive and unfair, but it has exacerbated America’s inflation problem and contributed to historic, out-of-control spending.