Biden’s Student Loan Relief Will Lead to Severe Tax Hikes, More Inflation, Economists Say

News Analysis

President Joe Biden’s ambitious plan to eliminate $10,000 of federal student debt, and $20,000 for those borrowers who received federal Pell Grants, will worsen the government’s roughly $30 trillion deficit while giving the incumbent party a justification to raise taxes steeply in the near future, economists who study the issue have told The Epoch Times.

Though often presented as an altruistic measure that will ease or wipe out the burden of indebtedness for those who had no choice but to borrow to fund their education and who now struggle with payments, the plan comes with significant moral hazard. It will foster reckless financial behavior and prove politically divisive as other categories of borrowers wonder why their own needs are considered secondary, the economists say.

Economic Factors

The administration’s claims that the plan is “paid for” because of anticipated changes to the size of the federal deficit this year are controversial and have met with skepticism even among former Democratic officials such as Lawrence Summers, who served as Secretary of the Treasury under President Bill Clinton.

Though praised by some grateful debtors and Democrat politicians, the question of the new measure’s feasibility, and who will pay for it and how, remains largely unanswered, some economists say. Opponents and supporters do not line up along partisan lines. The bipartisan consensus is that Biden’s plan is a tall order, believes Gary Wolfram, a professor of economics at Hillsdale College.

Even nonpartisan organizations with no animus against Biden have noted the exorbitant costs that will befall not only the wealthy but average taxpayers at the back end, Wolfram told The Epoch Times.

“This is going to cost taxpayers—the average person out there—about $500 billion, according to the Committee for a Responsible Federal Budget, which is a pretty middle-of-the-road group,” Wolfram said.

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