The US economy has been 'more than fine' without your student debt

It's been almost two years since millions of borrowers like Gwen were saddled with monthly student-loan bills.

The pause on federal student-loan payments gave a 61-year-old single grandmother with $75,000 in student debt an extra $200 a month in startup cash to launch a side-gig sewing face masks. She was able to afford food and utility payments because of her sales.

One of the borrowers who were able to pay off other forms of debt was Carney. Her story shows how student debt can provide extra juice to the economy and people's lives. The argument is that less debt means more economic freedom for people and more vitality for the country.
Marshall Steinbaum, senior fellow at the Jain Family Institute and economics professor at the University of Utah, told Insider that the economy has been "more than fine" during the pause on payments. Workers have gained the financial flexibility to quit their jobs and pursue other opportunities, marking a real shift in how the economy has worked throughout the living memory of anyone who's really alive now.

Steinbaum said that those against broad relief and newfound worker power want to return to a world where workers are lucky to have one job and will take anything they're given by their bosses, including that they have to repay their student loans.
The pause has been extended 3 times.

In March 2020, Donald Trump paused student-loan payments.
The pause has been extended an additional three times since President Joe Biden took over. There is no reason why student debt cannot be canceled completely if the pause can continue. The extra $5 billion per month in Americans' pockets could be a boon for the economy.

If you can afford to pause student loan payments over and over again, you can afford to cancel it, wrote NAACP President Derrick Johnson in a statement. Progressives like Massachusetts Sen. Elizabeth Warren and Senate Majority Leader Chuck Schumer have supported debt cancellation.

Pausing payments has given borrowers more economic freedom.
Millions of Americans have quit their jobs in order to find better opportunities, as a result of the pause on student-loan payments.
The Great Resignation is one of the great features of today's economy, and it would be difficult to resume student-loan payments if they were to be canceled.

The study concluded that if student debt were canceled, it would grant $4,000 to households in the lowest-income groups, money that could be used for monthly payments.

"If people can't get a home loan or a car loan, it makes it harder for them to find jobs that they are willing to take, because they can't afford them," he said. More than half of borrowers are delaying a home purchase because of their debt, according to the National Association of Realtors.

The government can afford relief.

There is no consensus on the cost of student loan relief. The Committee for a Responsible Federal Budget said in an August report that the student-loan moratorium has cost the government billions of dollars. Broad cancellation is a poor economicStimulus. It would put $90 billion back into the economy, but it would cost the US government 1.5 trillion dollars in uncollected loan repayments.

A paper from the Levy Economics Institute of Bard College and Steinbaum found that debt cancellation could boost real gross domestic product by an average of $86 billion to $108 billion per year, resulting in lower unemployment levels that would lead to 1.2 million more jobs.

Steinbaum said that if student debt is canceled, the federal government won't collect payments on the debt that's already been issued. Can the federal government afford a reduction in revenue of $100 billion a year or something like that? There is no doubt that the answer to that question is yes.
Others disagree. The additional extension of the payment pause is a view shared by more right-leaning economists and experts, and that is what Larry Summers, a former Treasury Secretary for President Bill Clinton and lead economist under President Barack Obama, wrote on the social media site in December.
He said that there is no special case for relief now that the unemployment rate has fallen to 4.2% from 4.6% in November.

Left-leaning economists argue that broad relief would benefit low-income people the most. The Roosevelt Institute pointed out that 39% of students with incomes of $30,000 and under have debt, compared to 30% of students with incomes over $200,000. Since student loan relief hasn't been done, we don't have the most concrete data about its effects.
The payment pause has lifted a hit off borrowers' backs, regardless of the true impact broad relief will have on the economy. One woman told Insider that the lack of monthly student loan payments saved her $377 a month, which she used to pay off her medical bills.

Steinbaum said that the ball and chain was lifted at the start of the Pandemic. I think it has had a positive effect on their finances and purchasing power.
The pause on payments gave borrowers relief they desperately needed. They wish it was not a temporary thing.

Do you have a story about student debt? How did the pause on payments affect you? You can reach out to her at asheffey@insider.com.