Larry Summers, a prominent economist who served two Democratic presidents, condemned the Biden administration on Monday for considering sweeping student loan forgiveness.
What is Biden’s plan?
On Monday, CNN reported that Biden is considering forgiving $10,000 of student loan debt per American who earns $125,000 per year or less.
Sources also told CNN that “administration officials have also recently discussed the possibility of additional forgiveness for specific subsets of the population,” though it is not clear exactly what that means. Biden is also expected to extend the pause on federal student loan payments.
The news outlet said Biden will announce his plan on Wednesday. Numerous other outlets confirmed CNN’s reporting on Tuesday.
It’s not clear if Biden’s plan will address the cost of college education.
What did Summers say?
The former treasury secretary made clear he opposes any plan to cancel student loans in sweeping fashion, suggesting a wide-scale forgiveness plan will drive up inflation.
“I hope the Administration does not contribute to inflation macro economically by offering unreasonably generous student loan relief or micro economically by encouraging college tuition increases,” Summer said.
According to Summers, sweeping “student loan debt relief is spending that raises demand and increases inflation.”
“It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions,” Summers explained.
Summers added the “worst idea” would be to continue the moratorium on student loan payments, which he said benefits Americans with high-paying jobs like medical doctors and lawyers.
“If relief is to be given it should not set any precedent, it should only be given for the first few thousand dollars of debt, and for those with genuinely middle class incomes,” Summers said.
How much would it cost?
The Penn Wharton Budget Model released preliminary analysis on Tuesday that said Biden’s plan will cost taxpayers $300 billion.
“We estimate that a one-time maximum debt forgiveness of $10,000 per borrower will cost around $300 billion for borrowers with incomes less than $125,000,” the analysis said.
“This cost increases to $330 billion if the program is continued over the standard 10-year budget window,” it added. “Eliminating the borrower income limit threshold produces a 10-year cost of $344 billion.”
If Biden appeases his far-left Democratic colleagues — who demand he forgive at least $50,000 of student loan debt per borrower — the analysis said it would cost taxpayers $980 billion.