As President Biden signals he is moving toward canceling student loan debt as a desperate, last-ditch attempt at a handout to motivate disenfranchised Democratic base voters, even liberals are panning the move on the merits of the policy.
Let’s call this what it is: a short-term political band-aid attempting to engineer better political turnout of key Democratic base demographics, at the expense of sound economic policy and lower- and middle-income earners.
Cancelling student debt would increase inflation
In February 2022, CRFB estimated that cancelling student debt would cost the federal government $1.6 trillion and add 0.1 to 0.5 percentage points to inflation. (“Cancelling Student Debt Would Add to Inflation,” Committee for a Responsible Federal Budget, 2/28/22)
In April 2022, Jason Furman said that student loan payment moratoriums increase inflation by “adding fuel to the fire.” (Myah Ward, “The hunt for peak inflation,” Politico Nightly, 4/15/22)
In April 2022, Larry Summers called Biden’s student loan moratorium “inappropriate at a time when the economy is overheated” because it “will be a injecting money into the economy.” (Lawrence H. Summers Tweet, 4/5/22)
In April 2022, liberal columnist Matthew Yglesias wrote an op-ed arguing that student loan payment moratoriums or cancelling student loan debt altogether would be “irresponsible” and make inflation worse, and that “suspending repayments… is not the right policy in an inflationary economy.” (Matthew Yglesias, Op-Ed, “Student Loan Forgiveness Is an Idea Whose Time Has Gone,” Bloomberg, 4/10/22)
In April 2022, Liz Peek wrote an op-ed arguing that Biden’s student loan moratorium “is bad policy and will make inflation worse.” (Liz Peek, Op-Ed, “Student loan moratorium is another Biden mistake that will drive inflation higher,” The Hill, 4/7/22)
Liberal economists have described cancelling student loan debt as “the least effective stimulus imaginable” that would benefit more high-income Americans than low- and middle-income Americans
Liberal economists like Jason Furman and Matt Bruenig “contend that forgiving student debt would be a poor economic stimulus investment.” (Michael A. MacDowell, “Student debt forgiveness makes political, not economic, sense,” The Citizens’ Voice, 12/31/20)
In November 2020, Furman said forgiving student loan debt is “not a great idea.” “Student loan debt forgiveness likely has a multiplier close to zero.” (Jason Furman Tweet, 11/15/20)
According to Bruenig, student debt is disproportionately held by high income households. (Matt Bruenig, “What Is the Current Student Debt Situation?” People’s Policy Project, 11/16/20)
BRUENIG: “…if we are being honest about things, student debt forgiveness is possibly the least effective stimulus imaginable on a dollar-for-dollar basis.” (Matt Bruenig, “What Is the Current Student Debt Situation?” People’s Policy Project, 11/16/20)
Student debt forgiveness would immediately help those who attended college and have higher earning potential, while doing nothing for those who did not attend college and have lower earning potential. (Matt Bruenig, “What Is the Current Student Debt Situation?” People’s Policy Project, 11/16/20)
According to the left-leaning Brookings Institution, student loan forgiveness “is regressive whether measured by income, educational attainment, or wealth.” (Adam Looney, “Student loan forgiveness is regressive whether measured by income, education, or wealth,” Brookings Institution, 1/14/22)
Foundation for Economic Education: “Student Debt Forgiveness Would Benefit ‘High-Wealth Households’ the Most, New Study Says” (Brad Polumbo, “Student Debt Forgiveness Would Benefit ‘High-Wealth Households’ the Most, New Study Says,” Foundation for Economic Education, 1/20/22)