President of the U.S.A Joe Biden announced Wednesday that the US government will write off $10,000 of student loan debtthereby realizing its electoral commitment.

The move is expected to boost support for Democratic candidates in November’s election, but some economists say it could fuel inflation, while congressional Republicans question the president’s authority to write off debt.

This $10,000 per credit write-off applies to former students whose annual income does not exceed $125,000 or $250,000 for married couples.

It is estimated that if all student loans were cut by $10,000, the total cost would be $321 billion, with 11.8 million borrowers or 31% of college students out of debt.

The measure targets “the families most in need,” President Biden said, noting that “the working and middle class have been hit hard during the pandemic.”

He stressed that the measure would not benefit high-income households and said, “I will never apologize for helping working Americans and the middle class, especially those who voted for $2 trillion in tax cuts that mostly benefited the most rich Americans and big companies. Some Democratic Party officials are pushing President Biden to write off debts of up to $50,000 per borrower.

Criticism

Republicans strongly resisted student loan forgiveness, with Senate Majority Leader Mitch McConnell stating that “President Biden’s student loan socialism is a slap in the face for every family that made sacrifices to save college money, for every graduate who paid off their loan, and to every American who has chosen a different career or volunteered to serve in the military to avoid debt.”

Former U.S. Treasury Secretary Larry Summers argued that debt relief “consumes resources that could be better used to help those who, for whatever reason, weren’t able to attend college,” noting that it could lead to higher tuition fees. .

Similarly, Jason Fuhrman, a Harvard professor who was former President Barack Obama’s chief economic adviser, noted that “it’s reckless to pour half a trillion dollars worth of gasoline on the fire of already raging inflation.”

However, Moody’s chief economist Mark Zandi sided with the White House, estimating that the measure would work deflationary.

Source: Reuters, APE-MPE.