Top Democrat Economist blasted US President Joe Biden’s administration on Monday for its decision on sweeping student loan forgiveness.
Just recently, the White House announced that Biden is considering forgiving $10,000 of student loan debt every American who earns $125,000 per year or less.
In the report released by CNN, a source revealed that the “administration officials have also recently discussed the possibility of additional forgiveness for specific subsets of the population,” and the president is also expected to extend the pause on federal student loan payments.
CNN also revealed that Biden will announce his plan on Wednesday which several other news outlets confirmed on Tuesday.
Following the report on Biden’s plan, Larry Summers, a prominent economist who served two Democratic presidents and former treasury secretary, made it clear to the public that he opposed any plan to cancel student loans in a sweeping fashion.
According to Summers, a wide-scale forgiveness plan will drive up 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 explained.
Summers also claimed 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. 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 worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers,” the top Democrat economist continued.
On Tuesday, the Penn Wharton Budget Model released its preliminary analysis and revealed that the president’s plan will cost taxpayers $300 billion.
“We estimate that a one-time maximum debt forgiveness of $10,000 per borrower will cost around $300 billion for borrowers with incomes less than $125,000,” the analysis said.
“This cost increases to $330 billion if the program is continued over the standard 10-year budget window. Eliminating the borrower income limit threshold produces a 10-year cost of $344 billion,” it added.
