How Delaying Loan Repayment Hurt Student Borrowers

A t the onset of Covid-19, the federal government chose to pause interest accrual on student loans to provide student borrowers financial relief. When unemployment climbed to 13 percent, and regulations at the state and local level restricted people’s ability to work for the sake of public health, such a reform seemed prudent. Dragging on well over halfway into the Biden presidency, however, the policy became increasingly troublesome. At what point would the government pull the plug? Would borrowers simply start repaying of their own volition?

Now, bills are coming due. And it looks like borrowers aren’t ready to go back to paying off their loans. Since the pause on interest accrual was lifted in October, only 60 percent of current
borrowers have made a payment. That’s right: Two in five federal student loan borrowers have not made a payment since the pause was lifted. That’s cause for concern, especially when you consider that aggregate student debt is at nearly $2 trillion, and 22 million Americans are student-loan borrowers.

While some of these borrowers likely simply did not realize that payments were coming due again, it seems unlikely that all 8.8 million of them belong in that camp. Borrowers got used to not paying back their loans. They got used to fellow taxpayers footing the bill for forgone-interest accrual, and now they are unprepared to fulfill their debt obligations. Even worse, the pause seems to have benefited affluent borrowers most, rebuking claims that it would disproportionately help lower-income borrowers.

Progressives have characteristically responded with calls for more forgiveness and more “compassion.” This wouldn’t be an issue, they argue, if we simply forgave debt and spent more taxpayer dollars on the behemoths that American universities have become. At the core of their argument is actually an infantilizing premise: People are not responsible enough to pay back money they’ve borrowed. Beyond that, it relies on a fundamentally misguided idea that actions simply don’t have consequences.

Contrary to progressive pipe dreams, what’s needed is a return to the simple principle of personal responsibility. The longer progressives drag borrowers along, the worse it will be when they realize that there will be no shortcut to student-loan repayment. This is far from a display of mercy: It’s irresponsible pandering that leaves taxpayers and borrowers both worse off in the long run.

Sometimes, real love is tough love. Pandemic-era compassion cannot become an excuse for personal irresponsibility.

Moreover, the Department of Education can work hard to inform borrowers of the fact that their student loans are accruing interest again. If they can mistakenly email 9 million borrowers to tell them that their loans had been forgiven, they can surely send communications to all current borrowers to encourage personal responsibility. This will especially help those borrowers who currently don’t realize that they missed a payment.

It should also be noted, of course, that the pre-pandemic status quo was far from perfect. Our higher-education system desperately requires reform, as recent events have shown. A broken federal-student-loan system has subsidized institutions of higher learning without any modicum of accountability, colleges continue to spend money on new sports arenas rather than substantive curricula, and too many universities have abandoned their duty to educate good citizens and well-rounded human beings.

Part of the reason borrowers don’t want to pay back their debt is because they’ve lost faith in higher education. Restoring trust through sound reforms must be a crucial leg of any future reform agenda.

If lawmakers intend to wean borrowers off a generous Covid-era interest holiday, they should also fulfill their end of the bargain and enact reforms that ensure students truly get the value they deserve from their diplomas. Furthermore, institutions of higher learning must refocus on academic excellence by scaling back rampant grade inflation, defining their value primarily by the intellectual contributions of their scholars rather than their production of activists, and improving ideological diversity on campus.

We would do well to internalize some Socratic wisdom: Every action has its consequences. There’s no such thing as a free lunch. It’s time to start paying back what we’ve borrowed — and rebuilding faith in our obligations to one another.

Editor’s note: This article has been updated since its original publication.