As policymakers consider economic policy options during the coronavirus pandemic, President Trump … [+]
As President Trump considers economic policy solutions to address the impacts of the coronavirus pandemic, student debt is apparently part of the conversation. According to CNBC, Treasury Secretary Steven Mnuchin said that suspending student loan payments is among their “list of 50 different items we’re bringing to the president for a decision.”
Mnuchin said they were considering a pause of student loan payments for three months as one way to provide relief to those struggling during this time. Earlier this week, Senate Democrats pushed President Trump to provide six months of loan forgiveness for federal student loans. Senator Elizabeth Warren also released her plan to handle both the health and economic issues of the coronavirus and it included student debt forgiveness—a staple of her run for president.
However, there are some serious considerations that must be made before enacting such a policy. The details have yet to be released for a proposal, but policymakers should consider if the payments be forgiven or will they just be paused. And if the payments are just paused, will interest continue to accumulate on those loans?
For some student borrowers, this could be a worse situation. Depending on their financial situation from work and their payment amount, making the payments could be better than a pause.
Borrowers who are working toward public service loan forgiveness might also prefer to make payments rather than pausing them. Those borrowers could have lower payments now that could count towards their progress to achieve total forgiveness. If the policy provided forgiveness rather than a pause, policymakers should consider how that counts towards repayment under the public service loan forgiveness program.
It is important to note that there are already protections for federal student loans, especially in times of hardship. One, students can enroll in income-driven repayment and have their payments based on their income, sometimes with payments as low as $0. Additionally, students can enter into forbearance during a time of hardship to not make their payments. These options could help students who might struggle during this time.
However, there is a difference is hardship and trying to create a stimulus. Some are calling for student loan payment pausing or cancellation as a way to give student borrowers more money during this economic downturn. That is part of the case Senator Warren made on CNBC. She explained that someone who had $600 student loan payments they could now reinvest that into the economy.
No matter the party, it seems that student loans are a major consideration as policymakers consider options to address the economic impacts of the coronavirus pandemic. All options would likely provide a boost to those with student debt who could use this money in times of hardship like these, though to different degrees.