With the return of student loans repayments, the end of COVID-era safety net is here

After three years of pause driven by the economic hardship and bipartisan government response to the COVID pandemic, student loan repayments resume today for about 28 million borrowers. It was always going to be the case that the payments would return at some time (interest accrual restarted Sept. 1), but that doesn’t make it any easier for the people reaching for their checkbooks.

The additional problem is, while restarting loan repayments is already a difficult financial pill to swallow for millions of borrowers, it won’t be the only one. Its impact will be compounded by the broader dissolution of the COVID-era expanded social safety net, including the end of additional federal funding for child care, with experts fearing a “child care cliff” that will close tens of thousands of child care programs and cut care for millions of children. Many of their parents will be forced to scramble to find additional care out of limited additional options or leave the workforce altogether.

This comes as more than 7 million people have already been disenrolled from Medicaid as pandemic protections expire, with as many as 10 million more at serious risk of losing coverage.

To recap that, at a moment when the economy has proven surprisingly resilient amid inflation and the harsh counter-response to it in the form of sharp rate hikes, as workers have actually managed to see some increasing wages and the rewards of a tight labor market, the government is simultaneously going to kick millions of people off of health insurance, massively reduce access to child care and force people to resume student loan payments. This seems like a less than ideal strategy, from a social and economic — and, closely linked, electoral — perspective.

Of course, the Biden administration has its hands tied in what it can do unilaterally. The prohibitions on Medicaid disenrollments were enacted statutorily as part of Congress’ response to COVID, and Congress was the one that terminated that link. The child care funding came as part of the American Rescue Plan, and the money’s running out. Biden already tried to do a mass student loan forgiveness via the novel strategy of the 2003 HEROES Act, only to be thwarted by an openly ideological Supreme Court.

Determined not to throw in the towel, the administration Friday announced next steps in a separate student loan forgiveness plan. This will involve a group of negotiators representing different constituencies working with the Department of Education to craft a program that the DOE hopes will at least protect borrowers whose balances have grown beyond their initial principal, are experiencing financial hardship, got duped by schools peddling useless degrees and other particularly needy people. It will take months, as required by the Higher Education Act, under whose authority the new plan is being rolled out.

Congress, meanwhile, struggles to even keep the federal government open and operating as House Republicans pursue pointless politically-motivated investigations and openly war with each other. Come election time, voters should remember who was trying to get them a better deal and who was busy with nonstop internecine bickering to the point of risking a shutdown — which, the DOE has helpfully clarified, wouldn’t stop student loan payments from being due — while millions of Americans stared down massive financial distress.