Thoughts on Another Student Loan Pause

Anyone who has been following the student loan industry in the past few years should know that federal student loan payments have currently been paused due to the COVID-19 pandemic. Policymakers understand that student debt borrowers may have difficulty making student loan payments if they are dealing with the fallout from the COVID-19 pandemic. Originally, the federal student loan pause was due to expire in September, but this date was recently extended to January. I have a few thoughts on another student loan pause that some people in the student loan space may also be thinking.

One of the biggest thoughts on another student loan pause is that it seems like another student loan pause will provide welcome relief for people who are challenged by student loans. The economic climate is still difficult for many people across the United States. Employment has not reached pre-pandemic levels, and many people are still facing challenges completing their work due to remote-work guidelines.

If people are having difficulties working jobs, they are likely having trouble paying for housing costs and other expenses. These people would definitely therefore have difficulties paying off student loans. The public interest would not be served if millions of people face negative financial action due to a failure to pay student loans under unusual circumstances, so the idea of a student loan pause makes sense.

However, when expressing thoughts on another student loan pause, it is also important to think about individuals with private student loans. The student loan pause only applies to borrowers who have federal student loans, and this accounts for many student debt borrowers. However, millions of people also have private student loans, and these individuals are not getting relief from the student loan pause.

Of course, it is more difficult for the government to provide relief to private student debt borrowers than borrowers of federal student loans since the government has less influence on private student loans. However, this does not mean that the government cannot provide any relief to borrowers of private student loans. Some states have suspended actions filed by private student loan lenders against borrowers, but the federal government should consider a more widespread relief program for borrowers of private student loans.

Another one of my major thoughts on another student loan pause is how long is the student loan pause going to last. Even if the student loan pause expires in January, the pause will have been put in place for nearly two years. This is a substantial amount of time in the life of the loan, especially for people who are in the public service loan forgiveness program.

The pandemic does not seem like it will go away anytime soon. Although it is possible that numbers will gradually decrease as vaccine hesitancy diminishes, it is also possible that we will be dealing with COVID-19 for years to come. It is an open question if the student loan pause would continue indefinitely because of public health conditions.

Another one of my thoughts on another student loan pause is if this will increase acceptance of a widespread student loan bailout. I have seen some posts on social media relating that if the government pauses student loan payments indefinitely, they should just cancel student loans altogether. At first, this thought can be dismissed since there are many differences between a student loan pause and a widespread student loan bailout.

However, the long-term practical effect of an indefinite student loan pause is similar to wide-scale student loan cancellation. This is especially true for people on income-driven repayment plans in which student debt will be forgiven after a certain period of time. The student loan pause might change public perceptions about student loans and it could make it more likely that a large student loan bailout would be more accepted by the public at large.

Another one of my thoughts on another student loan pause is that such an initiative might incentivize behavior that might not be productive. For instance, millions of Americans now might have money piling up in their bank accounts that would have been devoted to student debt repayment. It is an open question about what these individuals will do with the extra funds. Some need the money to make ends meet in this unpredictable time, but others might not.

Such accumulated money might be saved and invested by some, and this could lead student debt borrowers to achieve more financial security. However, some student debt borrowers might use the extra money on vacations, consumer goods, and the like. The risk of such broad policies is that it will have a disparate impact on the people it affects. A further student loan pause is only going to increase the amount of discretionary money certain people have and some might not use this money for positive ends. This might militate in favor of only keeping the student loan pause in place as long as is absolutely necessary.

In the end, the government has passed sweeping relief legislation aimed at assisting those affected by COVID-19, and the student loan pause provides valuable assistance to student debt borrowers, many of whom are struggling right now. However, some thoughts on another student loan pause should likely be considered before deciding to extend the student loan pause for a longer period of time.

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