President Trump may temporarily suspend student loan payments as part of his administration’s efforts to mitigate the economic impact of the coronavirus, Treasury Secretary Steven Mnuchin said Friday.
Mnuchin said economic advisers to the president are presenting Trump with a list of about 50 measures he can take to stem the growing fallout from the outbreak, including a cessation of student debt payments for a brief period of time.
“That’s on our list of 50 different items we are bringing to the president for a decision. That is something we are looking at,” Mnuchin told CNBC. “I can assure you the president is all about action, action, action.”
The Treasury Department did not immediately return requests for clarification about how the program would work. The Education Department could suspend federal student loan payments and accruing interest, using the same authority Sen. Elizabeth Warren (D-Mass) said she would employ to cancel education debt.
“We’re working with our interagency partners on the best approach to the student loan portfolio during this time,” Angela Morabito, a spokeswoman for the Education Department, said in an email.
Many federal student loan programs already permit deferment or forbearance on loans under certain circumstances, but doing so typically results in increased balances as interest accumulates. About 44 million Americans have student loan debt, and if they are laid off or see their hours cut due to the coronavirus outbreak, they may be forced to increase their overall student loan burdens. They may also try to meet their payments to avoid a penalty, but as a result, reduce spending on other necessities.
Some Democrats have called for a cessation of loan payments. The administration has already said it is considering low- or zero-interest loans for industries such as hospitality and travel that have been hit hard by the coronavirus-related downturn.
The idea would probably be supported by congressional Democrats. Rep. Alexandria Ocasio-Cortez (D-N.Y.) on Twitter floated suspending student debt payments during the coronavirus outbreak. She and other liberal lawmakers such as Sen. Bernie Sanders (I-Vt.) have called for outright canceling the entire $1.6 trillion student loan burden in America.
“Plenty of industries affected by the coronavirus are in Washington asking for a bailout, but student debtors have to keep making payments even if their hours are cut,” said Marshall Steinbaum, assistant professor of economics at the University of Utah and an expert in student debt. “In the 2008-2009 financial crisis, we bailed out the banks but not households. … Let’s not do that again.”
The Trump administration will have to wrestle with whether to set a precedent that could increase pressure to take bolder steps to help Americans burdened with student loans. Suspending loan payments, however, could prove useful in the president’s bid for reelection. Last year, Trump demanded aides present a plan to tackle student debt and the rising cost of college education, worrying that he has nothing that could compete with the expansive plans from Democrats vying for the office.