Experts Warn Canceling Student Loans Will Only Make Inflation Worse

Experts warn that canceling student debt makes for bad policy. But Biden and his administration are still flirting with the idea anyway.

According to Maya MacGuineas, the president of the Committee for a Responsible Federal Budget (CRFB), “debt cancellation may be an extremely appealing political talking point, but it is not good policy.”

Other experts advise that full student debt cancelation would cost the federal government roughly $1.6 trillion, and would do little to nothing to help those who need it the most.

Canceling student debt would also be inflationary, as it would increase the money supply without a corresponding increase in output. This would lead to higher prices for goods and services and erode the purchasing power of the dollar.

So while canceling student debt may seem like a panacea for struggling borrowers, it’s actually bad policy that would make things worse for everyone – especially if Biden follows through on his campaign promises.

As Karol Markowitz said in an opinion piece with Fox News, “‘Forgiving’ student loans is a wealth transfer from the poor and middle class to the rich.”

Markowitz goes on to say, “Canceling student debt would be a ‘windfall for the highest-earning graduates.'”

In other words, those who would benefit the most from student debt cancelation are those who can already afford to pay it back.

So why is Biden considering this bad policy? It’s probably because he’s feeling pressure from the progressive left to do something about student debt – a campaign promise that resonates with young people most.

Even though most moderate Democrats feel that the socialist-sounding talking points are in the party’s best interests to distance itself from.

Of course, the White House continues to downplay all of these concerns, saying that no decisions have been made about student debt cancelation. And that the administration is just “exploring” their options.

Most speculate that this is just another dog and pony show to score extra votes in the midterms. Baiting a gullible and much younger demographic who is banking on a student loan forgiveness program to cure them of their debts.

Put differently; a last-ditch effort by the Biden White House to buy some extra votes.

This is not the first time that experts have warned against canceling student debt. In fact, it’s something that economists on both sides of the aisle have cautioned against for years.

The idea may be appealing to some, but it would do more harm than good – especially in an already weak economy.

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