Some things are so unreliable that we have come to rely on their unreliability. Sound confusing? Just look at Washington, D.C. Does anyone really count on the promises or warnings that politicians espouse from the Capitol? No—you count on those promises being broken.
Student loan borrowers have been warned for months by the U.S. Department of Education that this was the “final extension” for the student loan moratorium. Reminders were sent out every month warning borrowers to prepare for payments being reinitiated. Those emails have ceased, along with any hope that the federal government would keep its word.
The moratorium went into effect on March 13, 2020, and now will last at least through May 1, 2022—that’s 780 days. The moratorium is costing taxpayers $5 billion a month. By the time May 1 rolls around, it will have cost taxpayers more than $128 billion.
The moratorium means that payments are not due, and interest is not accruing. Accounts that were already in forbearance will not accrue interest either. Even loans in default have had collections ceased.
The moratorium was supposedly put in place because college graduates were out of work in the early days of the pandemic and couldn’t make their payments. Whether that was the case then, it is certainly not the case today.
The Wall Street Journal perfectly summarized the situation in the labor market this way: “the unemployment rate among bachelor’s degree recipients has fallen to 2.3%. Some 1.1 million more were employed in November [2021] than in February 2020.”
These graduates are demonstrably better off today in terms of their employment than they were before the pandemic when no moratorium existed.
Furthermore, college graduates earn more over their lifetimes than those who do not attend college, but there is no handout for the people who went to trade school, learned a useful skill, and have worked throughout the pandemic in fields like construction.
This student loan charade is nothing more than socialism for the rich, in which upper-income households—who owe the most student loans—receive the benefit of taxes paid by the blue-collar lower- and middle-income classes.
And what about all those people who worked their way through college and used personal savings to finance their education in a financially responsible manner without accruing tens or hundreds of thousands in student loan debt? What about those who already paid off their student loans? Those taxpayers are also on the hook for funding this latest extension of the moratorium.
This is a penalty for prudence and an incentive for insolvency. It should’ve ended—as the Department of Education promised it would.
But a government promise has all the weight of the Mayan calendar’s apocalyptic predictions. In a word: none.
In August 2021—when the last extension was supposedly the final one—the nation had 10.1 million unfilled jobs. The latest data shows that figure has grown to 10.6 million. There are more jobs available than people to fill them, but impolitic policies like the student loan moratorium are giving people fewer reasons to work and earn a living.
The labor market needs stability to return to normal and that includes predictable public policy. Knee-jerk reactions to the whims of political activists result in unpredictability, unaccountability, and unsustainability.
As we take down our 2021 calendars and hang up new ones for 2022, we engage in a reliable ritual older than ourselves—almost as predictable as political promises being broken.