Washington: President Joe Biden said Wednesday that the US government would forgive $10,000 in student loans for millions of debt-ridden former college students, upholding a pledge he made in the 2020 campaign for the White House.
The move could boost support for his fellow Democrats in the November congressional election, but some economists said it could spur inflation and some Republicans in the US Congress questioned whether the president had debt to cancel. had a legal right to do so.
The loan waiver would free up hundreds of billions of dollars for new consumer spending that could be aimed at homebuying and other big-ticket spending, according to economists who said it would add a new wrinkle to the nation’s inflation battle.
Biden said during remarks at the White House, “Action has been taken for the families who need them most — the working and middle-class people who are especially hard hit during the pandemic.” He pledged that no high-income families would benefit, addressing the central criticism of the scheme.
“I will never apologize for helping working Americans and the middle class, especially not those who voted for a $2 trillion tax cut, primarily benefiting the wealthiest Americans and the largest corporations ,” Biden said, referring to a Republican tax cut passed by former President Donald Trump.
Under the Biden Administration’s student loan plan, 43 million borrowers earning less than $125,000 annually will benefit from targeted debt relief. And, loans of up to 20 million borrowers will be completely canceled. pic.twitter.com/BDPqDIKRaN— White House (@WhiteHouse) 25 August 2022
Tune in as I comment on my plan to bring student loan debt relief to the millions of borrowers who need it most. https://t.co/aZCrbeOH7k— President Biden (@POTUS) 24 August 2022
Borrower balances have been frozen since the start of the COVID-19 outbreak, with no payments required on most federal student loans since March 2020. Many Democrats had pushed for Biden to forgo as much as $50,000 per borrower.
Republicans mostly opposed student loan forgiveness, calling it unfair because it would disproportionately help high-income earners.
“President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid off their debt, and every American who chose a certain career path or volunteered to survive.” Served in our armed forces. Taking debt,” Senate Minority Leader Mitch McConnell said Wednesday.
White House domestic policy adviser Susan Rice told reporters that the administration has not yet set a price for the package, which will depend on how many people apply for it. He added that student loans received after June 30 this year are not eligible.
White House press secretary Karine Jean-Pierre told reporters that the administration has the legal authority to forgo debt under a law that allows such action during a national emergency such as a pandemic. Earlier, Republican US Representative Alice Stefnik called the plan “reckless and illegal”.
American university tuition fees are significantly higher than in most other affluent countries, and American consumers take in $1.75 trillion in student loan debt, much of which is held by the federal government. Biden said other countries could financially bypass the United States if students are not given economic relief.
The White House said the administration would extend a COVID-19 pandemic-linked moratorium on student loan repayments until the end of the year, with student loans up to $125,000 per year for single borrowers or married couples who earn less than $250,000. Let’s forgive the $10,000. ,
The Education Department said, some 8 million borrowers would be affected automatically; Others need to apply for forgiveness.
The government is waiving loans of up to $20,000 for some 6 million students from low-income families who received federal Pell grants, and proposed a new rule that shields some income from repayment plans and pays for 10 years of repayment. The latter waives off some loan balances, the education department said.
President Biden’s student loan relief plan will:
– Provide relief to 43 million borrowers
– Targeted relief dollars for low- and middle-income borrowers
– Help borrowers of all ages
– Advance Racial Equity pic.twitter.com/IY7cgRc28e— White House (@WhiteHouse) 24 August 2022
A study by the New York Federal Reserve suggests that cutting $10,000 in federal loans for each student would amount to $321 billion and eliminate the entire balance for 11.8 million borrowers, or 31% of them.
A senior Biden administration official told reporters that the plan could benefit 43 million student borrowers, with nearly 20 million of the loans canceled outright.
After December 31, the government will reintroduce the payment requirement on remaining student loans that have been stalled during the pandemic. This will offset any inflationary impact of the waiver, the official said. The official said the resumption of payments could also have an impact on prices.
Former US Treasury Secretary Larry Summers disagreed. He said on Twitter that debt relief “consumes resources that could be better used to help people who, for whatever reason, haven’t had a chance to attend college. It helps fight inflation by raising tuition.” Will increase too.”
Similarly, Harvard professor Jason Furman, who headed the Council of Economic Advisers during the Obama administration, said canceling debt would eliminate the deflationary powers of the Inflation Reduction Act. “It’s reckless to put nearly half a trillion dollars of gasoline on an already burning inflation fire,” he said.
Mark Zandi, chief economist at Moody’s Analytics, sided with the White House, saying that reinstating billions of dollars a month in student loan payments “would stunt growth and is deflationary.”