Such comments have left proponents of debt cancellation torn between optimism and frustration. “If they don’t, it gives borrowers false hope,” said Natalia Abrams, founder of the Student Debt Crisis Center, a nonprofit advocacy group.
The timing of the restart — just two months before the midterm elections — creates another political quagmire for Democrats, said Lanae Erickson, senior vice president for social policy at Third Way, a moderate Democratic think tank that supports some targeted student debt relief. but not extensive cancellation efforts.
“There’s obviously tremendous pressure, including from the Senate Majority Leader, to just cancel student loans,” Ms Erickson said. “The payment pause has just become inextricably linked to the student loan forgiveness conversation and makes it all the more politically risky for the administration.”
With inflation at its fastest pace in 40 years, the extension could fuel the booming economy by keeping cash in the hands of consumers who can spend it. This poses an additional challenge, as strong consumer demand has clashed with tight supply chains, labor shortages and a limited supply of housing to drive up prices.
Student loans: essential things to know
In March, the Federal Reserve raised interest rates for the first time since 2018, and it is expected to make an even bigger increase in May as it tries to rein in spending and rein in rising prices. While the effect of the extension is likely to be very small, it could make the Fed’s job harder, at the margin, as it attempts to cool demand.
The decision to extend, rather than resume or cancel payments, indicates disagreement within the White House about how loan repayments could affect the economy and voters, Ms. Erickson said.
“The fact that we’re seeing almost quarterly expansions at this point probably indicates that two forces are pulling in opposite directions and that’s the best they can come up with at this point,” she said.