President Biden’s student loan forgiveness plan could cost taxpayers over $1 trillion, driving up already record high inflation, and could increase the overall cost of college.
According to a new analysis from the University of Pennsylvania’s Wharton School, the plan could cost more than triple the $300 billion claimed by the Biden administration. Just the “debt cancellation alone will cost up to $519 billion,” the analysis said.
The extension of the student loan moratorium “will cost another $16 billion” and “the new income-driven repayment (IDR) program would cost another $70 billion, increasing the total plan cost to $605 billion” at a minimum based on Wharton’s model.
“However, depending on future IDR program details to be released and potential behavioral (i.e., ‘non-static’) changes, total plan costs could exceed $1 trillion,” the analysis said.
Biden’s plan will additionally drive-up inflation and raise the price of college tuitions, as explained by top Democrat economist Larry Summers, who served in the Clinton and Obama administrations.
“Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college,” Summers wrote on Twitter ahead of Biden’s announcement of the details of his plan.
“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,” he continued.
Biden’s plan also included the extension of the student loan moratorium which Summers said was the “worst idea.”
“The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers,” Summers explained.
Richard Vedder, a senior fellow at the Independent Institute and an economics professor, also warned that the plan will raise the price of college tuitions.
“Forgiving student loans increases incentives for colleges to raise tuition and fees more aggressively,” Vedder explained on Fox News. “Students will be emboldened to borrow more, thinking ‘I will not ever have to pay the loans back.’”
Vedder pointed out the data shows that “most new federal student loan money ends up being absorbed by higher tuition fees; universities and their staffs benefit much more than students.”
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