WASHINGTON (TND) — President Joe Biden’s major student loan forgiveness announcement is an attempt to curb America's rapidly-rising student debt but doesn't address the broader issue here: the high cost of college.
More than 40 million Americans will see their student loan debt reduced or eliminated and some economic experts warn that the plan will undermine efforts to cool record-high inflation.
"I racked up quite a bit of student loans during my time there,” East Carolina University graduate Johnny Mitchell II told The National Desk.
Mitchell left ECU with a graduate degree and about $95,000 of debt.
"My wife wasn’t working at the time so it was just me trying to support three people and it’s pretty difficult when you also add in the other factors of life — credit cards, just trying to pay rent, trying to pay utilities,” Mitchell said.
It's unclear when exactly the plan goes into effect. A White House fact sheet states that “more information on claiming relief will be available to borrowers in the coming weeks.”
It's a politically-divisive move in the run-up to the midterm elections.
"This has to be political because it’s certainly not about good policy,” said Maya MacGuineas president of the watchdog group Committee for a Responsible Federal Budget.
The non-partisan policy group estimates Biden's new plan, including debt cancellation and a payment freeze through the end of the year, will cost between $400 and $600 billion.
"So the outcome of this kind of temporary debt forgiveness, one-off debt forgiveness is that it’s going to create less certainty for future borrowers in a way that is actually going to drive up the cost of higher education, having the reverse effect of what one would hope,” MacGuineas.
Critics point to its impact on inflation, saying debt wiped away will lead to more money spent in the economy.
A former economic advisor to former President Barack Obama tweeted, "Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless."
"If you want to curb inflation, make the students who haven’t been paying their loans back start paying them back and spending will go down quickly,” said Ryan Adelberg, another student loan borrower.
White House officials say the majority of this debt forgiveness targets those who need it the most, saying 90% of that relief will impact people earning less than 75,000 while helping narrow the racial wealth gap.