Former Treasury Secretary Larry Summers on Monday cautioned the Biden administration against extending the moratorium on federal student loan repayments and knocked “unreasonably generous student loan relief” he said could worsen inflation.
“I hope the administration does not contribute to inflation macro-economically by offering unreasonably generous student loan relief or micro-economically by encouraging college tuition increases,” Summers, who served during the Clinton administration, said in a series of tweets on Monday morning.
“Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college,” he continued. “Student loan debt relief is spending that raises demand and increases inflation.”
The Biden administration is expected to make a decision soon on whether to expend the freeze on repayment and interest accrual for student borrowers set to lapse at the end of the month.
The pause was implemented under the Trump administration at the onset of the coronavirus pandemic and has since been extended six times.
Advocates and Democrats have pressed for continued relief for borrowers, citing ongoing financial hardship due to the coronavirus pandemic and rising inflation that has forced many Americans to spend more on basic necessities.
However, the continued moratorium has been met with considerable pushback from Republicans who say the relief is too costly and is unfair to Americans who didn’t attend college.
The four-decade high inflation the U.S. has seen in recent months has been at least partially attributed to the stimulus pumped into the American economy during the pandemic. Ending the repayment freeze has drawn support from some budget watchers as one of the most immediate tools the Biden administration has to help reduce inflation.
“It’s not large relative to the size of the inflation problem. But it’s large relative to the president’s tools to fight inflation,” Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, told The Hill last week.
Goldwein called ending the payment freeze “one of the most direct and instantaneous tools that the administration has” to combat inflation.
Earlier this year, reports also emerged that the Biden administration was considering canceling $10,000 in student debt for borrowers with certain income restrictions. But it’s unclear if the White House will move forward with the plan.
Proponents have pushed for widespread cancellation as a means to advance racial equity. Data shows borrowers of color face a disproportionate burden, especially Black Americans, who experts say are more likely to borrow at higher rates and struggle with repayment.
However, some experts have pressed for a more narrowly targeted plan to ensure those most vulnerable receive the relief.
“The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers,” Summers wrote.
“If relief is to be given it should not set any precedent, it should only be given for the first few thousand dollars of debt, and for those with genuinely middle class incomes.”