Lydia Hu of FOX Business reports on recent developments, noting that the move does not go far enough for progressive Democrats calling for repeal.
President Biden this week revived the possibility of the extermination of millions of Americans student loan one-stroke debt, a policy that could cost the federal government $ 321 billion.
Although Biden has so far canceled only part of the debt he promised to wipe out during the election campaign, the president – who is facing growing pressure from progressives as well as a declining approval rating – proposed this week the possibility of eliminating $ 10,000. borrower.
“I am considering dealing with some debt reduction,” Biden said Thursday in response to a White House question. “I am not considering reducing the debt by $ 50,000. But I am in the process of carefully reviewing whether there will be additional debt forgiveness.”
Cancellation of BIDEN’S STUDENT DEBT WILL BETTER INFLATION, EXPERTS WARN
Deleting $ 10,000 per borrower will require the government to cancel about $ 321 billion backed by federal loans, according to an analysis released by the Federal Reserve Bank of New York last week. This would benefit about 11.8 million borrowers, or approximately 31.1%, and would cancel 30.5% of overdue loans or defaults before the pandemic.
Under the policy, the average borrower will receive $ 8,478 to forgive a student loan.
President Biden speaks at an event on the Affordable Care Act at the White House on April 5, 2022 (AP Photo / Carolyn Kaster / AP Newsroom)
If the Biden administration puts some restrictions on forgiveness, such as a $ 75,000 income limit for households, the cost of the program will fall from $ 321 billion to $ 182 billion, according to the New York Federal Reserve. As of December 2021, the total outstanding balance on loans held at the federal level is $ 1.38 trillion.
The nation’s debt level is already at an all-time high of $ 30 trillion after unprecedented spending levels during the COVID-19 pandemic.
Progressives, including Senate Majority Leader Chuck Schumer, DN.Y., have called on Biden to cancel a $ 50,000 outstanding federal debt to a borrower by executive order. Democrats say Biden could use the existing executive branch of the Higher Education Act to order the education ministry to “change, compromise, refuse or release” student loans.
Biden supported the cancellation of a $ 10,000 student debt to most borrowers during his presidential campaign, but raised questions about his legal authority to do so by executive order. Last year, the president requested a note from the Ministry of Education to determine whether he had the authority to unilaterally cancel a student loan debt.
Such a large-scale enforcement action would almost certainly face a legal challenge, and it is unclear whether it could survive. Critics say the use of such power exceeds the president’s powers granted by Congress. Canceling student loan debt would also add to the nation’s already growing national deficit, which stands at almost a record $ 2.8 trillion for fiscal 2021.
Senate Majority Leader Chuck Schumer speaks to reporters at the Capitol on September 28, 2021 (AP Photo / J. Scott Applewhite / AP Newsroom)
The plan could also be disproportionately beneficial to wealthy Americans, according to analysis from the Becker Friedman Institute of Economics at the University of Chicago. The study found that deleting all student loan debt would allocate $ 192 billion to 20% of the best earners in the United States, but only $ 29 billion to the lowest 20% of US households.
According to the Universal Loan Forgiveness Program, the average person among the best-earning borrowers will receive a $ 5,944 forgiveness, while those with the lowest incomes will receive a $ 1,070 forgiveness, according to the survey.
Unpaid student loan debt has doubled in the last decade, approaching a staggering $ 1.7 trillion. About one in six American adults owes money on a federal student loan, which is the largest amount of non-mortgage debt in the United States. He was cited as a major obstacle to the “economic life” of the people by Federal Reserve Chairman Jerome Powell.
People rest on the grass at Brown University in Providence, Rhode Island, on September 25, 2019 (AP Photo / Steven Senne, File)
The proposal comes as US consumers struggle with the worst inflation in four decades, with consumer prices rising 8.5 percent in March from a year earlier. The rise in inflation has hurt millions of US households, especially low-income families, undermining profits and creating a huge political challenge for Biden, who has seen his approval rating plummet amid rising prices.
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Some economists are concerned that putting more money in Americans’ pockets at a time of already staggering inflation could exacerbate the problem.
“This is expensive, inflationary, poorly targeted and failing to address the major problems in our higher education funding system,” said Maya McGuineas, chair of the Committee on Responsible Federal Budget. A complete debt cancellation would be a huge help to wealthy doctors and lawyers, would exacerbate the inflation crisis and would cost almost as much as the entire 2017 tax cut.
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