(The Center Square) – President Joe Biden is considering canceling student loan debt for millions of Americans, a move critics say could increase inflation and further exacerbate the nation’s economic woes.
“I am considering dealing with some debt reduction,” Biden told reporters Thursday. He added that it wouldn’t be as much as the $50,000 per borrower he had initially discussed, but that he would have to take a “hard look” at another plan.
Critics say canceling student loan debt would further add to the federal debt and inflation, which is at the highest rate in decades. The latest economic reports indicate the economy shrank last quarter. Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget argued, “[The proposal] is costly, inflationary, poorly targeted, and fails to address the root of the problems in our higher education financing system.”
The economic pressures of inflation, fueled in part by the rash of federal debt spending in recent years, have Americans feeling the pinch. A recent Consumer Spending Report conducted by Morning Consult found that Americans are cutting back on discretionary spending to focus on the essentials. A newly released Gallup poll reports that a majority see inflation as a top concern.
“Americans’ confidence in the economy remains very low, and mentions of economic issues as the most important problem in the U.S. are at their highest point since 2016,” Gallup said. “Inflation, which registered as the top economic problem last month and continues to be, was previously at this level in 1984.”
A recent poll from NEXT Insurance reported that one in three small businesses have considered shutting down.
The current economic climate has raised the stakes for potential debt cancellation. Biden, though, has already canceled some students’ debts. The Department of Education recently announced “immediate debt cancellation” for 40,000 borrowers via Public Service Loan Forgiveness after years of complaints about mismanagement of the program. While the number of forgiven borrowers was comparatively small, it raised more questions about a more significant cancellation.
“Full debt cancellation would be a massive hand-out to rich doctors and lawyers, would worsen our inflation crisis, and would cost almost as much as the entire 2017 tax cuts,” she said. “Even partial debt cancellation would be costly, regressive, and inflationary. Forgiving $10,000 per person of debt would cost as much as universal pre-K or a full extension of the expanded ACA subsidies.”
Regardless of whether Biden cancels student loan debt, experts say the U.S. may be in for a bumpy economic ride and even a recession.