Cutting Off Student-Loan Relief in Sept. Will Have Consequences: Fed
Category: News & Politics
Via: texan1211 • 3 years ago • 21 commentsBy: Ayelet Sheffey (Business Insider)
S E E D E D C O N T E N T
President Joe Biden. Chip Somodevilla/Getty Images
- Biden recently extended the pause on student-loan payments through August 31.
- The New York Fed found once that pause ends, borrowers say they expect a 16.1% chance of delinquency.
- This is higher than pre-pandemic levels and is a sign of expected greater financial hardship.
Some student-loan borrowers don't feel too confident about staying current on payments if relief expires in September.
On Thursday, the New York Federal Reserve released a study analyzing what might happen when the pause on student-loan payments expires after August 31 — if President Biden doesn't extend it again or enact broad debt forgiveness. Using data from the May 2021 Survey of Consumer Expectations, which covers about 1,300 US households, the Fed found student-loan borrowers who participated in the pause on payments expect there's a 16.1% chance they will become delinquent, or fall behind on payments, if relief is cut off in September.
This finding is up from the pre-pandemic rate of 15.6%, and the report said there's a chance resuming payments could lead to delinquencies that "could reach or even surpass the pre-pandemic rate."
It added that "lower-income, less educated, non-white, female and middle-aged borrowers will struggle more in making minimum payments and in remaining current."
Biden recently extended the pause on student-loan payments for his fourth time in office as part of continued pandemic relief, and along with that extension, he announced a plan to restore over 7 million student-loan borrowers in default on their debt to good standing before they have to reenter repayment. This came after pressure from many Democratic lawmakers and advocates who were urging the president for more relief, and while the extension was welcome news, some Democrats were pushing for that relief to carry over through at least next year.
In addition to delinquency rates, the Fed also found that student-loan borrowers who received some type of relief on other forms of debt, like credit card and mortgage, during the pandemic have a higher likelihood of missing a payment once relief expires, compared to those who did not receive temporary relief because they "remain financially more vulnerable and expect a higher level of financial insecurity in the future."
Both Democrats and Republicans have expressed concerns with the student-loan relief Biden has implemented. While Republicans argued the continued extension of the pause on payments is unnecessary and costly to taxpayers, Democrats have sounded the alarm on restarting payments before borrowers are financially prepared. The Consumer Financial Protection Bureau also warned last week that 15 million student-loan borrowers could be facing "a difficult road" once payments resume.
While Biden himself has not commented on the potential for further relief, White House Press Secretary Jen Psaki said last week that Biden will "make a decision" about canceling student debt or extend the pause on payments once again before September rolls around.
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How can anyone be asked to pay their student loan debt going forward, either? With this example staring them in the face, why wouldn't an 18 year old borrow as much money as possible for as many years as possible, if he can expect it to be forgiven for the sake of fairness?
But even further than Why not forgive all mortgages? Or credit card card debt? Just wipe out all debt, altogether. Seems odd to limit it to a form of debt of which a majority is owed by people who either went to medical school or other post graduate programs.
You'll see the feedback when medical debt is cancelled.
Hold on a second. This was included in dire warnings about delinquent STUDENT debt?
Now I'm really confused. How is pausing student loans going to benefit 'lower-income, less educated, non-white, female, and middle-aged borrowers'? It's amazing how many political buttons can be pushed in one sentence. But it seems apparent the NY Fed is only throwing crap against the wall to see what sticks.
Looks like the banks that made those student loans are going to have to 'eat their peas'.
When, exactly, do Democrats think that these delinquent borrowers will be "financially prepared" to pay back 100% of their loans?
I was curious about why liberals/Democrats are for student debt relief and conservatives/Republicans are not, and I think I found the answer. It appears that Democrats tend to attract more votes from people with higher education levels than Republicans do, while the latter tend to attract more voters from lower education levels. Dumbing down the electorate pays off for the Republicans.
"The higher the education level, the more likely they are to vote Democratic." (LINK) ->
"25 years ago, Republicans were more educated than Democrats. Now it's the opposite, study says" (LINK) ->
Even a small difference in percentages can translate to millions of votes..
Is anyone really surprised that the kids not having to pay back student loans for a period of time would not find other ways to spend their money and go farther into debt? They must have expected the loans to be forgiven and just continued to add to their debt in other areas. It seems the government expected them to use the money they saved by not having to pay for student loans on things like food, rent and things like that until we were out of the pandemic. It seems the kids had other ideas. They will never be "financially prepared" until they learn to live within their means.
"...compared to those who did not receive temporary relief because they "remain financially more vulnerable and expect a higher level of financial insecurity in the future.""
So, those who get free shit expect more free shit - they bank on it.
Did you notice that AOC and people like her want all student loans forgiven, not based on income? I wonder if that is because if it was based on what people could afford to pay she would end up having to pay. Just another example of liberals taking from the middle class to benefit themselves.
They do. Look at the likes of Pelosi - scam after scheme. They don’t hold a monopoly on crooked but they are expert players.