As President Joe Biden considers canceling student loan debt, one expert is warning that the move would worsen inflation.
Earlier this week, Biden confirmed to reporters that he is “considering dealing with some debt reduction” — although not the $50,000 per borrower debt reduction favored by progressives. “I’m in the process of taking a hard look at whether or not there will be additional debt forgiveness, and I’ll have an answer on that in the next couple of weeks.”
In response, Committee for a Responsible Federal Budget President Maya MacGuineas said Wednesday that debt cancellation would contribute to rising prices.
“Student debt cancellation may be an extremely appealing political talking point, but it is not good policy,” she said in a statement. “It is costly, inflationary, poorly targeted, and fails to address the root problems in our higher education financing system.”
“Full debt cancellation would be a massive hand-out to rich doctors and lawyers, would worsen our inflation crisis, and would cost almost as much as the entire 2017 tax cuts. Even partial debt cancellation would be costly, regressive, and inflationary,” she continued. “Forgiving $10,000 per person of debt would cost as much as universal pre-K or a full extension of the expanded ACA subsidies.”
An earlier Committee for a Responsible Federal Budget analysis pinned the cost of universal pre-K at $150 billion. As of quarter 2 in 2021, Americans owed a whopping $1.73 trillion in student loans, according to a Federal Reserve estimate.
“Either the President is serious about reducing deficits and getting inflation under control, or he is not,” MacGuineas concluded. “The White House can’t have it both ways. We need to be focusing on a serious and effective agenda that prioritizes sound policies, not poorly targeted political giveaways.”
Beyond the White House, many leading Democrats are embracing the erasure of $50,000 or more in student loan debt — and have repeatedly pressured Biden to support their plans.
“We want our young people to realize that they can have a good future,” Senate Majority Leader Chuck Schumer (D-NY) said earlier in April. “One of the best, very best, top-of-the-list ways to do it is by canceling student debt, by getting rid of the $50,000, even going higher after that.”
In the meantime, Biden extended the student loan repayment moratorium through August 31. The freeze was originally slated to end on May 1.
A group of House Democrats sent a letter to Biden in March asking Biden to extend the pause through the end of the year, and Sen. Elizabeth Warren (D-MA) insisted that Biden has the authority to forgive all of the more than $1.6 trillion in student loans held by borrowers.