But student loan advocacy group says payments will cause ‘chaos’
President Donald Trump is correct to restart student loan payments, according to an economist interviewed by The College Fix.
“The Trump administration has already taken many positive steps toward addressing this issue,” Preston Cooper told The Fix via email. “Their public message–student loan payments are due again, and it’s time to pay–is welcome, and they need to keep hammering this in the media,” the American Enterprise Institute economist said.
Cooper is an accomplished higher education economist who regularly studies and writes about the cost of college.
“I’m also glad to see that they are restarting the collections system and clearing the backlog of applications for Income-Driven Repayment, both of which are necessary to return the student loan program to normal,” Cooper said.
The Department of Education has begun collecting federal student loans which have remained frozen since March 2020. Collections began on May 5 and may include wage garnishment.
Department of Education Secretary Linda McMahon said on April 2 that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”
She said the Biden administration “misled student borrowers about loan forgiveness” and her department’s student aid office “is providing every form of assistance we legally can to ensure that a monthly payment can fit into your budget.”
About 5.3 million borrowers have not been paying their loans. Cooper, with AEI, said borrowers may need to be informed that it is time to repay.
He said the “higher-than-normal rates of delinquency on student loans… could be an awareness issue: millions of borrowers haven’t made a payment in five years, and they don’t know it’s time to repay. Hopefully the Trump administration’s public-awareness campaign will fix some of this.”
Cooper also said the risk for loans should shift to colleges and away from taxpayers.
“When borrowers can’t pay their loans, colleges should be responsible for some of the cost,” Cooper said. “Colleges benefit from student loans, so there’s no reason borrowers and taxpayers should bear all the costs when things go wrong.”
The Fix reached out to several student loan advocacy groups, including the National Consumer Law Center and the Student Borrower Protection Center. Neither has responded in the past several weeks, although they provided comments elsewhere.
The National Consumer Law Center said the Trump administration planned to “seize” paychecks to get them to pay back their loans. “We do not yet know if the government will begin seizing tax refunds and Social Security benefits immediately on May 5, or if borrowers will have a couple more months before that happens,” the law center stated. “Generally, the Department must provide notice that it is going to start forced collection against a borrower and provide them time to object or remove their loans from default.”
Mike Pierce with the Student Borrower Protection Center said collections “will further fan the flames of economic chaos for working families across this country,” in a comment provided to CNBC.
On the other hand, many student loan borrowers have not taken advantage of the pause to pay down the essentially interest-free debt. Studies have found borrowers instead took on more debt and also planned to spend the freed up money on alcohol, drugs, and trips.
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IMAGE CAPTION AND CREDIT: President Donald Trump speaks to reporters; White House/YouTube