Inflation Complicates Biden’s Deliberations on Student Loan Forgiveness

Washington — Soaring food, gasoline and other staples will carry out his campaign pledge to cancel tens of millions of dollars in student loan debt between President Biden and his closest adviser. Further complicates the fierce debate about.

Mr Biden has suggested to Democrats that he will probably somehow proceed with student loan bailouts, but he is still financially able to wipe out some or all of the country’s $ 10,000 debt. We are asking the team for more information about the impact. 43 million federal student loan recipients.

At this spring’s meeting, Biden repeatedly sought more data on whether the move would primarily benefit wealthy private university students who may not need help.The country’s inflation rate of 8.6 percent, 40 years high, added another layer of complexity to the decision: if the government allows some, what does that mean for the economy? $ 321 billion loan??

“You can spend millions, and perhaps billions, of dollars. You should do it with your eyes wide open,” said Cedric Richmond, who resigned from Biden’s senior adviser last month. .. “He wants to make sure it’s based on fairness and doesn’t exacerbate inequality.”

Mr Biden has not yet made a decision on student debt forgiveness, but his aides say he will make it by the end of August. The White House is deeply divided on the political and economic implications of loan forgiveness. Biden’s chief of staff, Ron Klain, argued that it would rejuvenate the base of young voters who are increasingly dissatisfied with the president. Other aides have provided data showing that many Americans who have saved money to pay tuition for themselves and their children are resentful of the move.

Some economic advisers argue that this move could actually mitigate inflation at least a little, when combined with the resumption of interest payments on student loans, which had been suspended since the early days of the pandemic, and debt forgiveness. Did.

Mr Biden’s deliberations often symbolize his attempts to straddle the country’s deep ideological divisions within his party. According to those familiar with his ideas, Mr. Byden said his promise to provide drastic suggestions for dealing with racial and economic disparities, and the cancellation of loans exacerbated inflation. The working class is struggling to balance with concerns that it is considered a free gift and undermines his image as a worker’s champion.

Mr Biden is considering a student debt relief framework that his economic aide has ensured that he does not exacerbate inflation and potentially mitigates price increases slightly.

Under this plan, Biden could cancel debt to a particular borrower, up to $ 10,000 each. This allows some borrowers to effectively spend more money on goods and services such as furniture purchases and eating out, which may create additional demand. It may push up the price further. Every move to mitigate debt includes certain income restrictions on qualified people.

But at the same time, it will end the suspension of student loan interest payments to all borrowers, which was imposed in March 2020 and has recently been extended seven times until August 31st. Reduction of goods and services to resume loan payments.

Biden’s aide believes that the combination of the two policies can drive a small amount of consumer purchasing power from the economy. According to some government estimates, the two policies could reduce inflation very slightly. At least, the aides say they will cancel each other.

In an interview, Jared Bernstein, a member of the White House Economic Advisers, said, “Given that the fight against inflation is the president’s top national priority, the key economic fact here is debt repayment. In the event of a resumption and debt relief. Almost at the same time, the net inflation effect should be neutral. “

In the worst case, designing an inflation-neutral plan under the administration’s accounting would require limiting debt relief far less than what the Liberal Democratic Party had asked Mr. Biden for permission.

Opponents of debt forgiveness want Mr. Biden to resume paying loans and not tolerate debt. And they consider resuming interest payments as a new policy that could act as a counterbalance to cancel some debt when the suspension was intended to be temporary at all times. By doing so, the government says it makes inflation calculations look more rosy.

The administration’s mathematics, which shows that paired policies are neutral to inflation, “is not the way I think about it,” said Washington’s nonpartisan fiscal oversight group, a senior responsible federal budget committee. Policy Director Mark Goldwayne said. , And critics of cancellation proposals. “But it’s not entirely strange for someone to think that way about it.”

Biden told reporters this week that he was on the verge of making a decision on student debt. White House officials speak anonymously to discuss internal debates, and the administration wants to wait until the end of August to assess how much inflation is in question by then and the legislative movement in Congress. Said.

The White House said Congress wants to pass a bill on student loan bailouts, but Senate Democrats lack a vote, leaving executive action as the only obvious path. And there is increasing pressure from Democrats hoping that Mr Biden will succeed in his campaign promises.

Massachusetts Senator Elizabeth Warren, New York Chuck Schumer, Georgia Raphael Warnock, all Democrats present data to Mr. Biden at the May White House meeting, debt cancellation rebutts a degree It has been shown to benefit borrowers who could not get it. According to those briefed at the conference, the idea that relief will be a free gift to privileged people. Vice President Kamala Harris also met with Mr. Biden to classify the groups that would benefit, according to another official.

Democrats often quote reports from Temple University that nearly 40% of full-time undergraduates enrolled in the 2011-12 academic year had some debt, but did not get a degree six years later. is showing.

Republicans in Congress attacked the White House for being financially irresponsible. Virginia Foxx, a top Republican member of the North Carolina Education and Labor Commission, said in a letter to the Ministry of Education this month: I am seriously concerned about doing harm, because I cannot carry out that grand proposal. “

The agency’s loan servicer is afraid to recreate what happened last year, simply delaying payment resumption repeatedly when it sent a series of notifications to the borrower that payments would resume after January 31st last year.

Scott Buchanan, executive director of the student loan service alliance, an industry group, said the servicer will be borrowed “within the next few months.”

The president may find that pursuing a $ 10,000 forgiveness plan has less political interest than some aides might imagine.

Some borrowers and supporters of labor groups warn that moving forward with limited forms of bailouts with income caps could fuel more frustration among civil rights groups and young voters. is doing.

William E. Spriggs, a professor of economics at Howard University and chief economist at the AFL-CIO, said allowing only $ 10,000 in debt goes against Biden’s commitment to racial equality. .. He said limited cancellations were not enough to deal with racial disparities in the economy. Blacks and other non-white borrowers will eventually have higher average loan balances From their white companion.

“You are answering the white question,” Spriggs said. “If you do $ 10,000, you’re essentially telling whites:’You’re okay. You’re not in debt.” Not so for blacks. “

Debt forgiveness will benefit families in low-income households, he said. Because they don’t have much access to universities with higher endowments and more luxurious financial aid packages.

“This is a problem for regular Americans every day attending a local, poorly supported state university that had to pay tuition,” Spriggs said. “And that means black people.”

But by delaying the student loan bailout decision by a few months, Biden had already raised awareness that student loan bailouts were not a matter of racial equality, but a gift to privileged people. Said.

“By emphasizing these mythical ivy leaguers, he put some wrong thoughts in people’s minds,” said the creation of the Debt Collective, which urged the White House to cancel student loan debt. Said Astra Taylor, who is a person. “If people believe it, I’m like blaming the president.”