Aug 25, 2022 03:41AM ET
By: AnalysisWatch
President Joe Biden said on Wednesday the U.S. government will forgive $10,000 in student loans for millions of debt-saddled former college students, keeping a pledge he made in the 2020 campaign for the White House.
The move could boost support for his fellow Democrats in the November congressional elections, but some economists said it may fuel inflation and some Republicans in the U.S. Congress questioned whether the president had the legal authority to cancel the debt.
Debt forgiveness will free up hundreds of billions of dollars for new consumer spending that could be aimed at home buying and other big-ticket expenses, according to economists who said this would add a new wrinkle to the country's inflation fight.
The actions are "for families that need them the most - working and middle class people hit especially hard during the pandemic," Biden said during remarks at the White House. He pledged no high-income households would benefit, addressing a central criticism of the plan.
Borrower balances have been frozen since the beginning of the COVID-19 outbreak, with no payments required on most federal student loans since March 2020. Many Democrats had pushed for Biden to forgive as much as $50,000 per borrower.
Republicans mostly opposed student loan forgiveness, calling it unfair because it will disproportionately help people earning higher incomes.
The administration has yet to determine the price tag for the package, which will depend on how many people apply for it, White House domestic policy adviser Susan Rice told reporters. Student loans obtained after June 30 this year are not eligible.
White House Press Secretary Karin Jean-Pierre told reporters the administration has legal authority to forgive the debt under a law allowing such action during a national emergency such as a pandemic. Earlier, Republican U.S. Representative Elise Stefanik had called the plan "reckless and illegal."
American university tuition fees are substantially higher than in most other rich countries, and U.S.
consumers carry $1.75 trillion in student loan debt, most of it held by the federal government. Biden said other countries could bypass the United States economically if students are not offered economic relief.
The administration will extend a COVID-19 pandemic-linked pause on student loan repayment to year end, while forgiving $10,000 in student debt for single borrowers with annual income under $125,000 a year or married couples who earn less than $250,000.
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