Early last month, President Biden extended a repayment pause for student loans until October 2021. In the meantime, college seniors graduating in the midst of this pandemic are also dealing with the stresses of a weak economy and fewer job opportunities. Patrick Watson from Mauldin Economics sat down with reporter Taylor Velazquez to talk about the likelihood of student loan forgiveness and the future of the job market.
PATRICK WATSON: Well, I’ll say right now Congress has a whole lot to do. That may be done as part of some larger bill. But there's a lot of issues to that as to the fairness of it and is it sufficient for some people and too much for other people? I think just forgiving like that is probably unlikely. More likely, they'll change the terms in some way to simplify repayment.
KUNM: And could you break it down of how this forgiveness would even begin to work?
WATSON: What they might do is something like, examine the borrower's financial condition, what kind of job do they have, what is their income, these sort of things, then work out some sort of repayment schedule. The problem with that, is everybody's situation is different and looking at each situation would be really intensive work for the banks or the government. So, what they would more likely do is some sort of one size fits all, which would help some people, it would not be enough for other people, it would be like, when you're buying a piece of clothing, that's one size fits all, it's probably not exactly what you want.
KUNM: What are your thoughts on canceling about $1.6 trillion in student debt?
WATSON: I think it would be a benefit. Because here you would have people who want to work, we know that because they went into this debt in the first place, they wanted to improve themselves. So, if you can remove that debt from them, then that's just one less headache, it should make them more productive, it should let them increase their income. So, it would take some time for that to be apparent. And our political system is no good at looking at things long term.
KUNM: In your opinion, with the higher rates of college tuition, do you think that's hindering people from even wanting to earn a college degree?
WATSON: Well, certainly it's discouraging. Many, many people want to get more education and be able to advance themselves and earn a higher income. And that's just out of the question with the cost of college. And that is a huge problem.
KUNM: There's this notion that if student loans are canceled, there is a generational unfairness, what are the barriers that Millennials and Gen Z faced? And what do you make of the Gen X complaints about this?
WATSON: This idea that you can just work your way through college and get a degree and get a job and all that, it doesn't exist in the same way it did in the 1970s and 1980s. It's just not possible. The numbers don't add up.
KUNM: In your opinion, where are the jobs now? And where will the jobs be five years into the future?
WATSON: This pandemic has really up ended the picture there. But what I think we'll see increasingly is jobs will continue to get more technical. We're going to see routine sort of repetitive work, get automated. If all goes well, then some other kind of job will appear that they can go into. But there's a time lag there. We don't have an infrastructure in this country to take care of people during that time.
KUNM: Do you think graduating during COVID-19 will affect lifetime earnings and job mobility?
WATSON: Probably so. That is the result that often occurs, is they start out at a lower level than they would have if they had graduated two years before or two years later, and they never really catch up. This being the worst recession we've had since the 1940s. I think it will certainly be true.
KUNM: And last but not least, what advice do you have for recent grads who are entering the working world for the first time?
WATSON: I would first remind yourself that you did not ask to be entering the job market at this point in history. So, you have some challenges that other generations didn’t. But that does not mean that you have no hope. With the right kind of education and the right kind of drive, it is possible to build a good living, and hopefully we will have the rest of society helping you once we get through this crazy time.
KUNM: He is Patrick Watson, Senior Editor and Macro Analyst with Mauldin Economics. Thanks again, Patrick, and please come on the show again in the future.
WATSON: Thank you.
A longer version of this conversation appeared on our show No More Normal, which airs Sundays at 11 a.m.