Since taking office, President Joe Biden has looked at the idea of comprehensively canceling some level of student loans.
but with inflation At historic highs, the White House may shy away from providing relief to millions of Americans.
Biden is reportedly considering erasing $10,000 in debt for all borrowers, which would free 11.8 million people from student loans and forgive more than $320 billion in loans. federal Reserve,
Proponents argue that reducing the debt burden for millions of Americans will help boost the overall economy.
On the other hand, critics say another large federal spending package could contribute to inflation, pushing it even further.
“The economic impact of any proposal will be over the course of years or even a few decades,” White House economic adviser Brian Deez said in May.
“And therefore, the effect [of student loan cancelation] Inflation is likely to be over the near term – likely to be significantly lower.”
In February, a responsible Federal Budget Committee (CRFB) Estimated That 100% loan cancellation for all borrowers would push inflation from 0.1% to 0.5% in the 12 months after payments are over.
The CRFB noted that the cancellations would also boost consumption and demand without addressing existing supply chain problems, which could lead to additional inflationary problems.
While no official resolution has been issued, the Biden administration has considered imposing income restrictions on loan forgiveness.
For example, cancellations may be limited to borrowers earning less than $125,000, according to politician,
student loan payment freeze
The pause on student loan repayments is currently till the end of August and is not expected to be affected by inflation.
The freeze, first implemented by then-President Donald Trump in March 2020, was due to end on May 1.
More than 43 million Americans owe a total of $1.7 trillion in student loans, according to the Federal Reserve,
Nearly 100 Democratic lawmakers on March 31 shared a letter Urged the President to extend the freeze to protect borrowers before their previous May 1 end date.
The letter was signed by some of the most influential Democrats in Congress, including Senate Majority Leader Chuck Schumer, Senator Elizabeth Warren, and House Majority Whip James Clyburn.
However, the moratorium extension is less than what those MPs had sought.
“We are writing to urge you to act now to extend the pause on federally held student loan payments and meaningful student loan cancellations until at least the end of the year,” the legislators wrote.
The pause was implemented through the CARES Act on March 27, 2020, and was initially scheduled to expire on September 30 of the same year.
The Trump administration extended the freeze twice, until January 31, 2021, before Biden took office.
President Biden announced three prior expansions during his first year in office, the second of which was incorrectly classified as the “last” expansion. by education department,
If you work in the public service, read How Are You? debt can be forgiven regardless of future policy decisions.
Learn more why student loan borrowers may be able to get Big tax return this year,