Joe Biden eliminated more student loan debt on Friday, bringing the total amount he canceled to $153 billion for 4.3 million borrowers.
Republicans criticized Biden’s current effort to forgive student loan debt as a “scam” to buy votes ahead of the presidential election.
They argue it’s unfair to taxpayers who didn’t go to college or pay off their loans.
But the move to reduce student debt could also have much broader implications for the economy.
According to Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, no one will immediately see a tax increase because of the president’s largesse.
However, it will affect the public in multiple ways because it is effectively shifting debt from individuals to the nation.
“We’re increasing federal borrowing to essentially reduce personal borrowing for student debt,” Goldwein told DailyMail.com.
He said that while the Biden administration has announced a $153 billion cut in student debt, the actual figure is much higher.
Taking into account debt that will be canceled in the future and interest paid off while payments were suspended during the pandemic, the total amount forgiven is close to $600 billion.
President Biden spoke at an event focused on student loan debt forgiveness in Wisconsin on Monday. This week, the Biden administration announced that student loan debt cancellation has totaled $153 billion to date.
Eliminating such a large amount of student loan debt could have several effects, including increasing demand, which would lead to inflation.
Therefore, the cost would be spread across everyone else through higher prices.
Over time, the move would force the United States to issue more bonds, and more people will buy those bonds instead of investing in the private sector.
“Americans will feel the cost early on through slightly higher prices and, over time, slightly lower future incomes,” Goldwein explained.
If the rising national debt needs to be corrected as borrowing continues, it could take many different forms.
That could mean taxing the rich or cuts to government spending that would impact a wide range of Americans in different ways.
“Over time we will see an increase in the federal deficit and higher federal debts,” said Tristan Stein, associate director of Higher Education at the Bipartisan Policy Center.
“Ultimately, it is current and future generations of taxpayers who will have to pay for forgiven loans,” Stein said.
‘The national debt is 34 trillion dollars. Inflation is making life unaffordable and this administration is now forcing the American people to pay the costs of student loans that borrowers voluntarily accepted.’
In its latest announcement on Friday, the Biden administration said it had canceled another $7.4 billion for 277,000 borrowers.
“Biden’s policies are completely backward and illegal,” responded Republican House Speaker Mike Johnson.
“Biden’s student loan socialism is a scam,” wrote Sen. Joni Ernst (R-Iowa). “You’re not ‘canceling’; you’re saddling hard-working Americans with a huge bill.”
As Republicans attack the White House, the Biden administration has argued that the measure provides borrowers with breathing room and upward economic mobility that would allow them to contribute even more to the economy and the middle class.
The White House responded to criticism from House Republicans by singling out Republican members of Congress who had hundreds of thousands and even millions of dollars in Paycheck Protection Program (PPP) loans forgiven during the coronavirus pandemic.
Policy experts point out that for any policy decision, there are cost trade-offs, and at some point everyone pays some costs for different policies.
However, the rejection of the PPP’s argument was that Congress approved the program while the US economy was in danger, with the intention from the beginning that the loans would end up being forgiven.
Furthermore, rather than being a specifically designed forgiveness, it was considered an effort with broad benefits, although the full scope remains in dispute.
Supporters of Biden’s efforts to cancel student loan debt outside the Supreme Court after the president’s original plan was blocked in June 2023.
But while Republicans and conservatives reject Biden, Democrats have praised the administration’s effort on student loans.
House Democratic Leader Katherine Clark said Biden is “keeping his promise and helping everyday Americans get ahead.”
And the Biden administration has promised it won’t stop there.
On Monday, Biden announced additional actions to cancel student loan debt that, combined with previous actions, could affect more than 30 million borrowers.
Between the SAVE program and the new actions, Penn Wharton’s budget model estimates the measure would cost a total of $559 billion over ten years, including an additional $84 billion for the new proposals presented Monday, in addition to the $475 billion previously estimated for the SAVE plan.
But the White House effort is not without legal challenges.
18 Republican-led states have already sued the Biden administration over the SAVE plan.
The two separate lawsuits focused on the SAVE plan came after Republican officials were able to stop the president’s original student debt relief plan, taking it all the way to the Supreme Court, which blocked the effort last June.
The Biden administration previously estimated that the SAVE plan would cost $156 billion over a decade. The Congressional Budget Office said the figure is closer to $230 billion.
What remains to be seen is how higher education institutions and prospective students respond to efforts to cancel student loan debt. Experts wonder whether it will incentivize colleges to raise costs or encourage prospective students to take out larger loans under the impression they could be forgiven.
It could lead future administrations to take additional steps to pay off the debt. But the opposite also happens: Future administrations reverse forgiveness while the debt of emboldened borrowers soars even higher.