Former Treasury Secretary Larry Summers cautioned the Biden administration against extending the freeze on federal student loan repayments.
Summers took to social media to say "unreasonably generous student loan relief" could worsen inflation.
"I hope the administration does not contribute to inflation macro-economically by offering unreasonably generous student loan relief or micro-economically by encouraging college tuition increases," Summers tweeted Monday morning.
Summers, who served during the Clinton administration, added that "Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college."
"Student loan debt relief is spending that raises demand and increases inflation," he tweeted. "It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions."
The administration is expected to decide soon whether to extend the moratorium on repayment and interest accrual for student borrowers set to lapse at the end of the month. The Trump administration implemented the freeze at the beginning of the COVID-19 pandemic and it has been extended six times.
Inflation dipped from 9.1% to 8.5% in July and the debate whether the nation is in a recession continues — a deeper dive into the numbers points to inflation remaining elevated for the foreseeable future and a strong likelihood of the economy already being in a recession.
"The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers," Summers tweeted.
"If relief is to be given it should not set any precedent, it should only be given for the first few thousand dollars of debt, and for those with genuinely middle class incomes," he added.
Ending the repayment freeze is one of the most immediate tools the Biden administration has to help reduce inflation.
"It’s not large relative to the size of the inflation problem. But it’s large relative to the president’s tools to fight inflation," Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, told The Hill.
Summers’ tweets came on a day that a new CNBC poll found that 59% of Americans worry that any move to erase student loan debt could create a bigger problem for people already struggling with record-high prices.
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