President Joe Biden has spent months trying to figure out how to deliver on his campaign promise to keep federal student loan borrowers out of bankruptcy. He is trying to avoid triggering unhappiness and inflation for the wealthy.
On Wednesday, Biden is set to announce his student debt plan. He will write off debt of up to $10,000 for each of his borrowers, but he is expected to cap his income at $125,000.
Biden may also extend loan forgiveness for some borrowers, such as Pell Grant recipients, and may extend the suspension of debt service five times. Currently, his payment moratorium expires on August 31st.
Stephanie Kelton, a professor of economics and public policy at Stony Brook University, told MarketWatch that the gradual cancellation of debt and the resumption of loan payments in the coming months will help curb current inflation. He said it could be suppressed.
MarketWatch, citing a 2018 analysis by Kelton, found that canceling all outstanding student debt, which was about $1.4 trillion at the time, would boost gross domestic product by an average of up to $108 billion annually over the next decade. Did.
Expectations for Biden’s announcement have been building since April, but related issues have persisted for years. About 44 million people collectively owe her $1.7 trillion in federal student loans. Waiving some or all of it would cost taxpayers hundreds of billions of dollars.
Biden has some risks. With only a minority of Americans graduating from college (37.9% in 2021), debt cancellation can seem overly generous to those who deliberately went into debt to pursue a degree.
There is also the risk of resentment from some people who paid off their student loans without government assistance. According to Penn Wharton’s budget model, if the plan were to waive $10,000 for income earners under $125,000, most of the canceled debt would be held by the top 60% of income earners.
Again, the goal is to alleviate the burdensome debt of millions of households so they are free to buy homes and start families.
Canceling student loan debt “will open a snake can. There will be anger and possible lawsuits from Republicans and other opponents. Partners analyst Ian Katz said.
“One way to (slightly) soften opponents is to combine forgiveness announcements with benefits or programs for those who haven’t attended college,” Katz said. I think they’ve been thinking about what they can do to make it look less ‘elitist’ than just helping alumni.”
Biden has canceled borrowers’ debts from for-profit schools. Last week, the Department of Education announced it would write off her $3.9 billion debt of students attending the (now defunct) ITT Technical Institute.
That brings the total amount of student debt forgiven under the Biden administration to $32 billion, which the White House called “more than any administration in history.”
But his broader plans are a difficult act to balance.
Former Treasury Secretary Lawrence Summers said: series of tweets On Monday and Tuesday, the Biden administration should not offer unwarranted relief that could contribute to inflation or raise college tuition.
“Student loan debt relief is an expenditure that increases demand and increases inflation,” he said, consuming resources that could have been used to help those who couldn’t get into college, and tending to raise tuition. The moratorium will benefit “highly paid surgeons, lawyers and investment bankers,” Summers said.
The issue has become political football in this year’s midterm elections. South Dakota Republican Senator John Thune introduced a bill earlier this year to stop deferring loan payments, so borrowers won’t have to pay their debts since the pandemic began in March 2020. who paid off the
Senator Elizabeth Warren (Democrat, Massachusetts) $50 per semesteron tuesday murmured Debt cancellation narrowed the racial wealth gap among borrowers, provided relief for 40% of those who failed to earn a degree, and helped working families buy their first home or retire. It is believed that you will have the opportunity to save money. “That’s right.”
Please contact Janet H. Cho at [email protected].