Committee for a Responsible Federal Budget President Maya MacGuineas said Wednesday that President Joe Biden’s proposal to cancel some or all student loans in the U.S. would make inflation worse than it already is.
“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.”
Another potential problem with student loan cancellation is that it is a giveaway to one of America’s richest demographics–the college-educated, who have the highest overall average earning potential in the country.
Doctors, lawyers, engineers and wealthy business owners would make up a large chunk of people who would have their debts forgiven, while those with heavy medical, business or credit card debt would not receive any help with those debts.
“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.”
“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.”
In 2021 numbers, Americans owed $1.73 trillion in student loans, so even partial forgiveness could add several hundreds of billions to the already exploding deficit as the government takes on that debt.
Student loan repayments for government-subsidized loans were frozen back at the beginning of the pandemic, and Biden has extended the freeze several times. August is the end date for the current freeze period, but some Democrats are already urging Biden to extend it again, this time until the end of the year.
Republicans opposed to further freezes have argued that indefinite extensions amount to a de facto loan forgiveness, while still holding the debt over students’ and graduates’ heads.
“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.”
Republicans don’t disagree about giving young people a good future, but would argue that adding to inflation woes by increasing public debt does the exact opposite, and will hurt all young people in the future, even those who never took loans for college.