Money Rehab with Nicole Lapin - Biden's Terrible Student Loan Timing

Episode Date: July 25, 2022

Nicole gives an update for student loan borrowers, decodes the chance of forgiveness, and why Biden's hand is forced. 

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Student debt has been such a mess over the last two years that I'm honestly not even

sure how to report on it anymore. As you might remember, the student loan freeze started in March 2020 when the pandemic lockdowns began in earnest. The moratorium has now been extended six times. Six times! With policymakers saying that the last couple extensions would be the last and then, inevitably, extending the deadline yet again. Now, the student loan freeze is set to thaw September 1st, 2022, and borrowers have been told that come September, they're going to need to start paying off their debt again. But whether or not that date is going

to be pushed back like the six other dates before it kind of feel like anyone's guess at this point. It's really been tricky for me as a financial expert to give folks advice on how to deal with student debt because it's been such a moving target. And obviously, even though this indecision in Washington makes it harder for me to do my job, this indecision is 100 times more challenging for people who are actually in student debt right now and are figuring out how to configure their spending plans with a looming recession and the potential of having to send off their student debt payments yet again after a two-year hiatus. So here's why this is such a bad look for Biden. And I haven't heard any other financial expert talk about this. The whole point of the student loan moratorium was

to help Americans in debt. Whether or not college is worth the tuition is a whole other debate or a whole other episode. But I think we can all agree on why people go to college. People go to college in hopes that it will help with their careers and that a degree will help them get high-paying job opportunities. The fact that this group of people are then slapped with crushing, crushing debt is a problem. It feels like a trap set for people with the best intentions. And so I do think the student debt moratorium was the right thing to do. But here's the thing. As we've been talking about on this show, inflation is soaring. And one of

the ways policymakers are trying to curb inflation is by raising interest rates. And loyal money rehabbers know raising interest rates is great for savers, but hurt people in debt. So essentially, what we're seeing playing out is that Biden told student loan borrowers that he'd take care of them and kept pushing off the date that they would need to resume payments. Until the exact time frame that interest rates are going up. See the problem? And I will say, most federal borrowers have fixed interest rates, so the interest rate hikes are not going to affect their payments. However, it is safe to say that everyone will be affected in some capacity, directly or indirectly. Student loan borrowers who have refinanced may be affected directly, or borrowers with a fixed rate may be affected indirectly because as they have to start repaying their loans back, their spending plans probably will be tighter and they'll probably have to put more

money on their credit cards, which will have a higher APR because of interest rate hikes. You get it. It doesn't look good. And as the November midterms approach, Democrats know it's a bad look. Reportedly, Biden is considering giving $10,000 of relief for folks who owe federal student debt that are making under $150,000 a year. A White House spokesperson recently confirmed to Insider that he's still planning to announce some sort of debt relief before August 31st, when the pause on payments is now set to expire. Republicans aren't too hot on this plan. Generally, the stance by the party is that student loan debt cancellation essentially shifts the debt to the taxpayer. And that's unfair and even more unfair to the college

graduates who paid off their student loans. Republicans have argued that addressing tuition costs is more important than debt forgiveness, which I can absolutely get down with. But I think it's an oversimplification. And like so many other issues, we need both, which in this case is student loan forgiveness and lower tuition. For today's tip, you can take straight to the bank. With Biden's approval rating in the pooper, something has got to give. His hand is forced to make some concession around student loans. And when he does, tell your friends you heard it here first on Money Rehab.

You heard it here first on Money Rehab. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself

so that you can get it together and get it all.