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Tags: biden | school | loan | debt | forgiveness

Biden's School-Loan Forgiveness Plan Divides Economists

Student-loan forgiveness
Student-loan forgiveness (Dreamstime)

By    |   Tuesday, 30 August 2022 02:11 PM EDT

President Joe Biden's controversial student-debt forgiveness plan has divided economists. The plan includes forgiving up to $10,000 in loans for individuals earning $125,000 or less and an additional $10,000 for borrowers from low-income backgrounds who received Pell Grants in college, The New York Times reported.

Biden administration officials state the plan is "paid for" — because the federal deficit is set to shrink by at least $1.7 trillion this year compared with last year. White House economists, like Jared Bernstein of the Council of Economic Advisers, argue that the plan will not add to inflation.

Biden announced that after a nearly three-year "pause" in federal student loan payments for the pandemic, they will restart in January, The Times reported.

Harvard's Jason Furman warned that forgiving student debt will add to inflation. By reducing or eliminating future loan payments, consumers will have more money to spend. While borrowers won't be getting checks from the government, they will be relieved of the financial burden of monthly payments.

Furman argues that Biden's plan will also have the effect of encouraging universities and colleges to increase tuition rates and burdening future students with heavier loans. He also worries about people who did not take out student loans ultimately paying for the plan, The Atlantic reported.

Conservative economists say the plan would cause higher inflation and burden taxpayers with hundreds of billions of dollars in new debt.

Forgiving existing debt, and reducing the degree to which some future debt will be repaid, will cut into revenue for the federal government and increase budget deficits, The New York Times states, adding: "It's unclear what share of eligible borrowers will go through the process to request debt cancellation from the Education Department, which has not yet set up the forgiveness program.

"It is also not clear how many people who apply to have their debt canceled would have paid back their full balance if Mr. Biden had not taken any action. Each of those variables could significantly affect the total cost in lost revenue."

© 2022 Newsmax. All rights reserved.


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President Joe Biden's controversial student-debt forgiveness plan has divided economists. The plan includes forgiving up to $10,000 in loans for individuals earning $125,000 or less and an additional $10,000 for borrowers from low-income backgrounds who received Pell Grants.
biden, school, loan, debt, forgiveness
417
2022-11-30
Tuesday, 30 August 2022 02:11 PM
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