Such comments have sent debt forgiveness proponents tossing and turning between optimism and frustration. “If they don’t do it, it will give borrowers false hope,” said Natalia Abrams, the founder of the Student Debt Crisis Center, a nonprofit advocacy group.
The timing of the reboot — just two months before the midterm elections — is creating a new political quagmire for Democrats, said Lanae Erickson, the senior vice president for social policy for Third Way, a moderate Democratic think tank that is promoting a number of targeted debt relief. support student loans. but no broad cancellation efforts.
“There’s obviously tremendous pressure, including from the Senate Majority Leader, to just cancel the student loans,” Ms Erickson said. “The payment pause has just become inextricably linked to the canceling conversation about student finance and makes it all the more politically dangerous for the administration.”
With inflation at its fastest pace in 40 years, the extension could add fuel to the hot economy by keeping money in the hands of consumers who can spend it. That poses a further challenge as strong consumer demand has clashed with constrained supply chains, labor shortages and a limited supply of housing to push prices up.
Student loans: important things to know
The Federal Reserve raised interest rates in March for the first time since 2018 and is expected to rise further in May as it tries to slow spending and contain price increases. While the effect of the extension is likely to be very small, it could make the Fed’s job on the margins more difficult as it tries to cool demand.
The decision to extend payments, rather than resume or cancel them, points to disagreement within the White House about how the loan payments could affect the economy and voters, Ms Erickson said.
“The fact that we’re seeing almost quarterly expansions right now is probably an indication that there are two forces going in opposite directions and this is the best they could come up with right now,” she said.
