*First posted in The Hill on 11/23/21*

Federal student loan payments have been on pause for almost two years as mandated by the CARES Act. During this period the pause has been extended twice, the last time by the Biden administration in August with the announcement it would be the last time borrowers would get a reprieve. These are the facts.

Here is another one: Borrowers are not ready to start repaying their debt in early 2022. Surveys and polls have shown that borrowers are anxious about it with the most recent one showing that “89 percent of fully-employed borrowers say they do not feel financially secure enough to resume payments in a few months.

This reality is coupled with surging inflation at 30-year highs. Consumer goods cost 6.2 percent more in October than they did one year before.

This gives the government two choices: extend the pause, which would seriously undermine its credibility, or let the repayments resume and face the consequences of millions of borrowers in financial distress with a significant portion defaulting. The defaults could be especially large among Black and Brown students who lack the resources to pay, further exacerbating the income disparity of student debt. Either option is undesirable. Amidst all this, borrowers are being forced to switch servicers, which will only add to the precariousness of the situation.

Anticipating that much will go wrong, the government is considering some temporary flexibility measures to smooth the transition to repayment. While these will be necessary and should be implemented, much more has to be done if the government wants to avoid a looming crisis.

First, if there was ever a time to cancel student debt it is now. About 60 percent of all the borrowers in default owe less than $10,000. Therefore, just a $10,000 debt cancellation would prevent millions of borrowers from going into default. Beyond justice, it is practical.

It is also time for the government to recognize that the student debt crisis won’t be solved with these small short-term fixes. Student debt needs comprehensive restructuring, not just forgiveness.

When banks restructure debts the main goal is to find a sustainable liquidity level to allow the entity to operate in the future. This usually includes forgiveness of debt, but also includes measures to enhance the borrower’s ability to make payments that fit into their budgets.

In the current system, the main culprit is the interest that accrues and capitalizes on the loan principal. It comprises approximately one-third of a student’s debt load. It never should have been the responsibility of students but rather of the government to invest students’ principal repayments to make the return necessary.

Interest is the bugaboo of all attempts to reform the student debt system. The income-based repayment plans can only work if the payments are made small which extends the tenor of the repayment. But these plans keep the interest meter running compiling mountains of extra interest cost for borrowers. Switching this responsibility from the students to a government would solve this problem.

This is an example of one way to make student debt better fit into a borrower’s budget, which would mitigate defaults. A comprehensive restructuring that forgives debt while containing future payments is urgently needed. The constant drumbeat to just forgive various amounts of debt corrupts the restructuring process. We can do better. We can both forgive and see to the future.