It’s Time to Suspend Federal Student Loan Payments

It is hard to believe that higher education was essentially functioning normally just two weeks ago. Then the novel coronavirus started to make itself known, with travel being suspended, in-person classes being suspended and then moved completely online, and now all on-campus operations are quickly grinding to a complete halt. Much of the American economy is also grinding to a halt thanks to social distancing practices and restrictions on certain sectors of the economy.

This sudden recession (depression?) has placed higher education under an incredible amount of strain, although our industry is far better off in the short term than many other service industries. This has also resulted in a number of proposed economic stimulus packages and other ideas to keep the economy moving. President Trump’s current higher education-related proposal is to unilaterally waive interest on student loan payments. But since this does not actually reduce payments (instead just allowing people to pay down more principal), the economic benefits of the proposal are likely to be zero if this plan survives potential legal challenges.

If the federal government wants to provide economic relief for millions of Americans who will likely be struggling with their student loan payments (or getting into income-driven repayment) over the next several months, my recommendation is relatively straightforward. Congress should seriously consider passing legislation to suspend all federal student loan payments for a period of six to twelve months. Just like the coronavirus is freezing the economy, freezing student loan payments would give Americans a chance to recover before either resuming normal payments or going onto income-driven repayment plans. A six-month halt would also give people time to navigate the complicated income-driven repayment system, which is likely to be overwhelmed in the short term.

To explain how this would work, consider a student with $15,000 in debt and six years of payments remaining. In the case of a six-month pause, the student would still have $15,000 in debt and six years of payments six months from now. Since this plan would not directly forgive any student loans, the taxpayer burden would be relatively small in the long term. The only cost would be that more struggling borrowers would enroll in income-driven repayment plans. I also would not count this six-month pause toward the required number of payments for Public Service Loan Forgiveness, as no payments would be made.

Hitting the pause button on student loans could be a good way to get more money in the hands of Americans in the short term while not resulting in a massive forgiveness of student debt. It is an idea worth serious consideration at this point.

Author: Robert

I am an associate professor of higher education at Seton Hall University who studies higher education finance, accountability policies and practices, and student financial aid. All opinions expressed here are my own.

3 thoughts on “It’s Time to Suspend Federal Student Loan Payments”

  1. I’m all for a pause on debt, and the resulting interest. I can’t get behind the debt forgiveness. I made it through college without any debt, and my wife took years to pay off her student loans…just like you are supposed to. We can’t teach people that they don’t need to have any responsibility. They chose to attend school, and they chose to take out a loan. It’s clearly spelled out in there that it needs to be paid back. People need to learn that in the real world, actions have consequences. People aren’t going to bail you out because you complain about how tough or “unfair” things are. Quite a few in this generation have grown up with everything being given to them -participation trophies, teachers not being allowed to fail students for not doing work, being told they are “special” and “unique” – just like everybody else. Yeah, that’s where the “snowflake” term comes from…..each one is special and unique.

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