Ken Blackwell is Senior Fellow for Human Rights and Constitutional Governance at Family Research Council. This article appeared in The Washington Examiner on March 3, 2022.
Most people are ready to return to normalcy, but the pandemic has given Washington bureaucrats a chance to extend their reach. They won't relinquish that power without a fight.
President Joe Biden's decisions to extend emergency powers longer than needed — for example, with the eviction moratorium — serve as a perfect illustration of the federal government refusing to let individuals return to normal. Ultimately, the courts decided this moratorium was a gross overstep by the executive branch, but a similar scenario will be playing out as the deadline to extend the student loan moratorium approaches.
This moratorium, heavily pushed by left-wing Democrats, is one step closer to having taxpayers cover all student debt. But if Biden gives in to the demands of liberals, it will have devastating long-term consequences. This continued freeze of student loan repayments confuses consumers, leaving them open to scams, and disrupts the economy. But Biden may cave to pressure because it is politically advantageous this year.
In March 2020, lockdowns forced many to stay home, and market instability forced many companies to lay off employees. At the time, the dramatic turn of events substantiated the decision for some extreme emergency measures. This included a pause in student loan payments as a temporary stopgap. Two years later, the “emergency” policy remains, even though the unemployment rate has dipped to 4% and most states have abandoned all pandemic restrictions.
When Biden caved to pressure from the far Left and extended the moratorium in December, many senior officials pushed back, including his chief domestic policy adviser, Susan Rice. Ignoring all evidence to the contrary and disagreements within the White House, Biden insisted that the moratorium is helping the economy. But the data paint a very different picture.
Approximately 27 million people with student loan debt have chosen not to pay their loans since March 2020. They are unlikely to refinance until the moratorium expires. Eventually, all of their missed payments will come due, and when that happens, interest rates will likely be significantly higher than they are now. This will saddle many people with insurmountable levels of debt. Those who waited to pay their loans may be left with limited options for refinancing or assistance. Instead of encouraging fiscal prudence, Biden is incentivizing reckless behavior that will ultimately hurt those with student loan debt.
Similarly, another extension of the moratorium gives false hope to current students. Biden has denied that he plans to cancel student debt unilaterally, and Congress is unlikely to do it. Students who took out additional loans based on the Left’s campaign promise to forgive them — borrowers between 2020 and 2021 caused the average student loan debt to rise by more than $1,000 — are in for an unpleasant surprise. As pressure from liberals continues to plague the White House, the ultimate victims are the borrowers and taxpayers. Due to this instability, many loan providers have decided to no longer service federal government loans, which means the debts of 16 million borrowers will need to be transferred to other providers.
This transition opens the door for scammers to exploit vulnerable borrowers and create confusion among consumers. Continued uncertainty about the loan moratorium adds fuel to the fire, and fraudsters are launching scams that often involve fake promises of government relief. The blunt force of a government-controlled market through this moratorium is changing incentives and helping predatory companies.
Additionally, the moratorium will negatively affect the economy and taxpayers for years to come. Lawrence Summers, former Treasury Secretary of the Treasury for President Bill Clinton, argues that "relief is indirectly benefiting high-interest lenders, like credit card companies, who get paid back with funds saved on account of the moratorium on student debt payments." Instead of allowing the free market to function, the president is picking winners and losers between borrowers and lenders. And he has done an abysmal job of it.
My experience as mayor of Cincinnati and Ohio's secretary of state taught me the importance of opposing unnecessary government interference. I have watched reckless politicians pass expansive policies that allow the government to be in control of the free market, only to reap the inevitable consequences of jamming up the economy's gears and hurting consumers, taxpayers, and the economic prosperity of a state.
Crafting public policy based on political talking points never works. Instead of hypocritically pandering to his base, the president should end the student loan moratorium and actually live up to his campaign promise of being "a president for all Americans." Right now, this promise continues to ring hollow.