More than three years after the start of the COVID-19 pandemic, many businesses are reopening and the economy is starting to return to a new normal. However, for many people, the new normal also means losing their pandemic-era support measures. These benefits included housing, unemployment insurance, healthcare, and student debt forgiveness. During the pandemic, these measures helped keep the economy afloat, as economic hardship among the common people often restricted their spending.
While many of these economic support measures have already ended, student loan repayment will begin this September, following the end of the COVID-19 emergency period. In an interview with Business Insider, economist Marshall Steinbaum of the University of Utah expressed his concerns with a post-support economic environment. Steinbaum remarked that when “people have more spending power… they can spend more, and that’s good for aggregate demand.” In other words, having a higher demand helps stimulate the US economy and the end of student debt relief could potentially slow it down. The end of this system could lead to economic fallout.
So how far will this potential economic fallout reach? The reach of student loan forgiveness was vast, helping “41 million borrowers save $5 billion per month” and providing “$2.4 billion in loan relief to 38,000 borrowers,” according to StudentAid.gov. Together with other measures such as relief to approved claims and stimuli to small businesses, the government provided “nearly $13 billion in targeted relief to over 640,000 borrowers.
Such a large-scale pandemic, coupled with far-reaching economic stimuli, has not been experienced in decades, and the effects of the economic fallout are left to speculation. However, through the eyes of several economists, we can piece together some possibilities. For instance, economist Bernard Yaros of Moody’s Analytics feels that resuming student loan payments would not lead to any great changes in the US economy. After all, the US economy is huge and multifaceted, and the end of student debt forgiveness would not likely mitigate the effects of inflation happening in the economy today. On the other hand, others, like Michael Madowitz, a director of the research and grantmaking organization Equitable Growth, believe that a decrease in spending could lead the US economy into a recession.
While the devastation caused by the end of stimuli, or lack thereof, cannot be determined for sure until the economy experiences the after-effects, the US and the world can prepare for these economic challenges, as they have navigated others in the past. The start of a post-pandemic “new normal” marks the importance of preparation and prediction in a multifaceted economy.
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