Student Loan Forgiveness: Experts Warn Joe Biden About Massive Inflation Impact of 100% Student Debt Cancellation

Experts warn that the US inflation situation would only become worse if President Joe Biden removes significant tracts of student debt.

Maya MacGuineas, head of the Committee for a Responsible Federal Budget (CRFB), cautioned that while student debt forgiveness is a popular political talking topic it is a bad policy.

Americans Could Suffer More With Inflation Through Student Loan Forgiveness

According to Jessica Anderson, executive director of Heritage Action, erasing student debt would hike inflation by up to 20%.

In February, when inflation was at 7.48 percent, the CRFB cautioned that erasing all $1.6 trillion in student debt would raise inflation by 0.1 percent to 0.5 percent a year after repayments started.

The group estimates that eliminating all student debt would cost $1.6 trillion, nearly as much as Biden's iconic $1.9 trillion American Rescue Plan while also boosting household balance sheets by a similar amount and reducing repayments by $80 billion in the first year.

Even a little increase in inflationary pressures, according to the group, might exacerbate present inflation dynamics, raising the danger of a wage-price spiral and making it more difficult for the Federal Reserve to re-anchor inflation expectations around its current goal.

They also anticipated that most of this rise would occur if the Biden administration extended the student loan payment moratorium for another year because the increase in cash flow to people would be the same, as per Fox Business.

Joe Biden Faces Pressure Over Student Loan Forgiveness

Progressive Democrats and student debt relief groups have been pressuring President Joe Biden to eliminate the debts of about 41 million students. In response, Biden indicated on Thursday that he may use his presidential authority to eliminate some debt. However, he stated that he will not grant forgiveness for amounts less than $50,000.

The statement follows the president's campaign vow to eliminate at least $10,000 of each American borrower's debt in 2020. Progressive senators including Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Massachusetts, have pushed the president to use executive action to forgive up to $50,000 in debt per borrower, according to USA Today.

His party members are pleading with him to pardon $50,000 per loan. He swears he won't do it, but he doesn't specify how much he's contemplating.

During his campaign, Biden indicated that he intends to erase at least $10,000 in student debt for each individual. He's repeatedly extended a moratorium on forcing debtors to repay their loans, which was put in effect by then-President Donald Trump at the time of the COVID-19 outbreak.

Activists have been heartened by their growing momentum on this subject, but some are fearful that Biden will not go far enough. Jen Psaki, the White House press secretary, said Thursday that Biden is still debating whether to connect debt relief to borrowers' income levels, an idea he's previously discussed. "Certainly something he would be looking into," she added.

She dismissed claims made by Sen. Mitt Romney, R-Utah, and others that debt relief is only a political gift. Psaki stated that Biden's objective is to continue to offer assistance to those who need it most, to help folks gain some more breathing room, CBS Miami reported.