AOC calls America's surging education costs a 'moral hazard'
Just before Christmas, President Joe Biden extended a student loan moratorium that's allowing millions of Americans to temporarily stop making student loan payments without accruing interest.
In a new interview with Yahoo Finance, progressive Congresswoman Alexandria Ocasio-Cortez said that Biden could endanger the country if he doesn't make the reprieve permanent before it expires on May 1.
“I cannot understate the danger and the risk — economically, politically, and just where we are right now as a country — of allowing the moratorium on student loan payments to lapse in May,” she said in an interview for Influencers with Andy Serwer releasing this week.
While Biden used student loan forgiveness as a talking point on the campaign trail, he's put off taking that step in office by repeatedly extending the freeze on public student loan repayments that began under then-President Donald Trump. Borrowers with private student loans haven't had that reprieve; they have had to continue paying those loans during the pandemic.
Speaking to Yahoo Finance, Ocasio-Cortez suggested that forcing millions of borrowers to start taking on student debt payments could not only threaten the recovery, but would also be unethical in light of the economic hardships a generation of young student debtors already faces.
"We are at such a delicate point in the financial and just general economic recovery post-COVID that to then re-start payments that are essentially the size of a mortgage payment, sometimes even larger, on a generation that was already so devastated ... It could throw out of balance already what is a very fragile recovery," she said.
Not to mention, Ocasio-Cortez added, "Forgiveness ... it's the right thing to do."
‘Prepare for payments to resume’
During the 2020 campaign, Biden promised to forgive $10,000 in federal student loans per person. While he has not made good on that promise yet, his administration canceled debt for certain borrowers including those who were defrauded by a for-profit college chain. Some Democrats including Ocasio-Cortez, Sen. Chuck Schumer (D-NY), and Sen. Elizabeth Warren (D-MA) want him to go further and forgive up to $50,000 in student loans per person.
During a Yahoo Finance live interview last week, Biden economic adviser Jared Bernstein characterized student debt negotiations in the White House as “a very intense, ongoing process."
The White House has asked Congress for legislation to address surging student debt in the U.S., but negotiations have gone nowhere in the deeply divided Senate. Consequently, the administration is publicly urging borrowers to “prepare for payments to resume” in May.
Some moderate to conservative voices have urged the administration to “wind down” the moratorium. “It's time that we get back to a new normal, where people who owe student loans are beginning to repay again,” Shai Akabas, the director of economic policy at the Bipartisan Policy Center, told Yahoo Finance in December.
‘I don't think it's a legitimate argument’
While student debt has become a hotly debated topic during the pandemic, Ocasio-Cortez is quick to point out that borrowers were defaulting even before COVID-19. The U.S. government holds over $1.61 trillion in loans among approximately 43.4 million borrowers, working out to an average federal student loan balance of $37,113, according to a recently updated report from the Education Data Initiative.
Ocasio-Cortez rejects the notion that a president might not have the authority to eliminate the debt outright. “I don't think it's a legitimate argument,” she said of those who have raised that question, including White House Chief of Staff Ron Klain.
Ocasio-Cortez joined a group of progressive lawmakers last week including Sen. Warren in urging the administration to clarify that it does have the authority to cancel student debt. They're asking the administration to release a memo “outlining your legal authority to broadly cancel federal student loan debt and immediately cancel up to $50,000 of student loan debt per borrower.”
If the Biden administration can legally pause student debt payments, Ocasio-Cortez reasons, it must have the authority to cancel them. In Congress, she would go even further. She touts her sponsorship of the Student Debt Cancellation Act, aimed at eliminating both federal and private student loans for all former and current students.
“The true moral hazard here is the surging costs of education in the United States," she said.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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