Biden's plan to cancel student debt will send inflation soaring
- A Biden administration may soon decide to cancel borrowers' $10,000 in student loan debt.
The proposal is another sign that the government is seriously out of touch. This is an unfair handout that will cost huge sums of money to push inflation and benefit the wealthy elite not the lower- and middle-class families. The American people need relief not aggravate their policies Already bad conditions lined the pockets of the liberal elite.
The existing Biden administration's moratorium on student loan repayments has been extended multiple times and has cost taxpayers $130 billion. Cancelling $10,000 in debt for each borrower would cost as much as $373 billion.
The national debt and federal spending have gotten out of hand. In 2020 the U.S government spent more than $6 trillion compared with $6.82 trillion in 2021 or 30% of the economy. The U.S now holds about $243,000 in debt per taxpayer and the Congressional Budget Office expects the U.S to Interest costs will triple over the next decade accounting for 12% of the entire federal budget.
Interest payments on U.S debt alone will cost each household about $2,600 in 2021.
Democrats argue that the huge cost of canceling student loan debt doesn't matter because it stimulates the economy by giving borrowers more money.
In reality the plan would cost the government far more than it would cost to provide stimulus. An analysis by the Responsible Federal Budget Committee found the government spends as little as 3 cents on every dollar spent on student loan relief up to 27 cents. activity will occur.
Such reckless spending will inevitably make inflation worse than it is now.
The federal government is pumping so much money into the economy that demand is growing too fast for production to keep up. Inflation hit another 40-year high in May at 8.6% Inflation now costs American households an extra $460 a month.
Low-income households are badly hurt by inflation. That's because low-income Americans spend a much higher percentage of their income on basic goods. Under high inflation high-income households reduce their purchases of luxury goods while low-income households cannot reduce most of their consumption. Expenditures as they spend mostly on necessities like housing and groceries. High-income households can "stock up" on these items when they are cheap.
Not only would this policy hurt low-income Americans by increasing inflation but it would also be fundamentally unfair to them. Many low-income Americans do not have significant student loan debt because they decide not to go to college or take the cheaper route through community college because Tuition fees are high.
Millions of Americans serve in the military for a free education and they work long hours to complete their education rather than go into debt or take the initiative to pay off debt. All these sacrifices are made by people who can only use the information they have: if they take Loans they will hold due
to contractual obligations.
Not only are these Americans deprived of some of the upward mobility that higher education brings but they are now being told that their sacrifices were futile.
So who benefits? Mainly elite.
The Brookings Institution describes those who benefit most from student debt relief as "the higher the income the higher the education level the more likely to be white." Currently the bottom 20% of households hold $3 in student loan debt for every $1 in debt. income earner. About 75% of student loan repayments come from the top 40% of income earners.
Even after spending billions to cancel debt and severely damage the economy in the process the policy could actually worsen the student loan crisis for future generations. First the main driver of high tuition fees is the federal government's subsidies to universities. if The government's decision to further subsidize education costs will incentivize colleges and universities to charge students more.
Further cancellation of student debt will signal to future borrowers that their debts will also be cancelled at some point. College students will be incentivized to take on as much debt as they can because they don't expect any consequences.
how much will you pay? The true cost of higher education in sailing
Americans worry about how they will pay for their next meal and transportation to and from get off work. Giving alms to wealthy elites should be completely off the table especially when they come at the expense of those suffering from soaring prices. This policy is a slap in the face For working families.
Isabelle Morales is a policy communications specialist for the American Tax Reform Organization.
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