Time’s Up: Federal Student Loans Pause Nears End

Federal student loan repayments are poised to restart following a three-year pause enacted in response to the COVID-19 pandemic. The end of the emergency period was confirmed last week by Education Secretary Miguel Cardona. During a Senate Appropriations Committee hearing, Secretary Cardona shared, “We agree, and we’re preparing to restart repayment because the emergency period is over, and we’re preparing our borrowers to restart.”

In a key exchange with Sen. Katie Britt (R-AL), Cardona acknowledged the fundamental expectation of debt repayment. Britt, citing White House Press Secretary Karine Jean-Pierre’s remarks on federal debt, stated, “If you buy a car, you are expected to pay the monthly payments. If you buy a home, you are expected to pay the mortgage every month. That same logic must apply to student loans.”

Despite the imminent return of loan repayments, uncertainty hovers over the Biden administration’s plans. While they propose forgiving up to $10,000 in federal student loan debt and up to $20,000 for Pell Grant recipients, these plans face significant legal challenges. If given the green light, this forgiveness program could eliminate $441 billion in student debt, affecting over 40 million borrowers.

Conservative think tank The Mackinac Center for Public Policy has filed litigation to bring the matter to a head by directly challenging the extended freeze on student loan repayments. The group argues that extensions beyond the initial six-month pause authorized by the CARES Act lack congressional approval and legitimate legal justification.

The papers filed in the case state, “In all, the Moratorium and its serial extensions have effectively extended Congress’s six-month suspension of student-loan payment obligations and interest accrual for an additional 32 months and counting—more than five times the length of the suspension Congress legislated to expire September 30, 2020.”

The lawsuit focuses on the Department of Education’s frequent reliance on the Higher Education Relief Opportunities for Students (HEROES) Act to justify the moratorium. The Act passed in 2003, is intended to provide relief to students entering active military duty during a “war or other military operation or national emergency.”

This case posits that the Department’s use of the HEROES Act to justify a long-term student loan pause is beyond the statute’s scope, intended primarily to assist those serving in wartime military. The lawsuit contends, “Recasting the HEROES Act from a statute permitting limited modifications for targeted groups to one that can suspend payments and cancel interest for all 45 million borrowers is a change so significant” that it fundamentally revises the statute.

Furthermore, the suit claims the extended moratorium violates the Constitution’s Appropriations Clause as each month of the Moratorium results in the “unlawful cancellation of approximately $5 billion of debt owed to the U.S. Treasury.”

With the economy recovering in full force – according to Joe Biden – and the national unemployment rate reaching a 50-year low, the justification for the ongoing student loan payment moratorium appears increasingly tenuous. It’s high time for fiscal responsibility to return to the forefront and for borrowers to resume the repayment of their loans, just as with any other financial obligation. As we move forward, the need for responsible policy-making that respects the taxpayer’s dollar is more critical than ever.