A $10,000 student loan forgiveness scheme is anticipated from Joe Biden on Wednesday
According to the Associated Press, individuals familiar with the scheme said President Joe Biden will launch a loan forgiveness programme on Wednesday.
President Biden is scheduled to announce on Wednesday that he will pardon thousands of people’s federal student loan debt and extend a repayment moratorium into next year, costing Americans about $300 billion.
One-time maximum debt forgiveness of $10,000 for borrowers with incomes below $125,000 would cost taxpayers roughly $300 billion, as estimated by the Penn Wharton Budget Model.
If the programme is maintained for the typical 10-year period, the price rises to roughly $330 billion.
According to the Associated Press, on the eve of the release, the specifics of President Biden’s plan were still being worked out among an unusually small group within the Biden administration.
Liberals and progressives have pressured the president to help more struggling borrowers, but moderates and Republicans have raised concerns about the equity of such a broad amnesty.
Government student loans have steadily increased throughout the years, and today total over $1.6 trillion. The newest government statistics shows that over 43 million Americans carry federal student debt, with about a third owing less than $10,000 and over half owing less than $20,000 in total.
As of August 31st, payment delays imposed during the pandemic were to be lifted.
Biden’s proposal to forgive up to $10,000 in debt per borrower on the campaign trail included no mention of a maximum household income. However, when rising inflation took a political toll and the president sought to avoid political allegations that the cancellation would benefit people with higher take-home pay, he tightened that commitment in recent months by adopting the income cap.
The Committee for a Responsible Federal Budget (CRFB) found that the $10,000 forgiveness proposal would eat up nearly ten years of deficit reduction and nullify disinflationary effects, undermining the newly enacted Inflation Reduction Act.
“[D]ebt cancellation would boost near-term inflation far more than the IRA will lower it,” CRFB said. Cancelling $10,000 in debts could increase inflationary pressure by 15 basis points immediately and further down the road.