‘Temporary Band Aid’: Biden’s Student Loan Plans Could Drive The US Toward Recession, Fiscal Watchdog Argues
Biden’s plan to cancel student loans and cut monthly repayments could drive the country towards a deeper recession, a federal watchdog group argued on Thursday.
Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget (CRFB), a fiscal watchdog group, testifiedbefore the Committee on Education & the Workforce Thursday morning about the current student loan crisis. The Biden administration’s plan to continue the lingering pause on student debt repayment, changes to the income-driven repayment program and the “blanket debt cancellation” promise will worsen the national economy, he argued.
The Biden administration extended a student loan repayment freeze that was enacted under the Trump administration during the COVID-19 pandemic until June 2023, or when litigation holding up its debt cancellation plan is resolved. The Supreme Court heard oral arguments regarding its debt cancellation plan — announced in August and would cancel up to $20,000 in student loan debt for Pell Grant recipients and $10,000 for those who are not — in February.
“Rather than support economic growth as this policy would have done early in the pandemic, now it’s stoking inflation and increasing our risk of recession,” Goldwein said. “We have estimated the pause has added about 20 basis points to the inflation rate, and that the president’s cancelation policy would add about 25 basis points.”
The Federal Reserve will enact “tighter monetary policy and high rates,” which results in “financial turmoil” that is reflected in the recent banking crisis, problems in the housing sector and could “put us into a recession,” Goldwein warned. Biden’s policies would also “worsen the very outcomes they’re trying to improve.”
“I have no doubt that many supporters of these policies have good intentions, but we’re not focused on the unintended consequences,” Goldwein said. “If the court allows the president’s unilateral debt cancellation to continue, the student debt program will become more like tuition roulette.”
Under the plan, borrowers won’t “really know in advance” what they will pay back “because of the arbitrary nature of this forgiveness,” he warned. Borrowing will rise, tuition will grow and lower quality programs will be offered that “are going to hurt overall education outcomes.”
Thursday’s committee hearing, titled “Breaking the System: Examining the Implications of Biden’s Student Loan Policies for Students and Taxpayers,” heard from four witnesses to understand how Biden’s student loan plans could impact students and taxpayers.
“Creating an offramp for responsibility, driving up college costs, disincentivizing real loan reform, and forcing hard working American taxpayers to pay for someone else’s loans is nothing more than a backdoor attempt at free college with abysmal implications for students, taxpayers, and our economy,” Republican Utah Rep. Burgess Owner, who chairs the committee, said in a statement. “Republicans are working to responsibly reform the nation’s student loan program through Congressional action, and our first subcommittee hearing will tackle this critical issue head-on.”
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Biden’s student “loan forgiveness” is an illegal executive order and it won’t stand. He knew it but it was just a vote buying scheme before the mid terms that apparently worked. Nevertheless, anyone with any common sense knows that the Government’s never ending “money printing” is the cause of our economic malaise. We already know that there was trillions of dollars in fraud and waste in the Covid and PPP payments. Then there’s the 730 Billion in the Democrats laughably called “Inflation Reduction Act” which is really just a “Green New Deal” slush fund and grifting plan for Democratic donors with, for example, 60 billion dollars for “environmental justice”? Then the RINO’s pile on with the Democrats near trillion dollar “Omnibus Spending Bill” with untold millions for “equity” projects, LGBTQ museums and, of course, millions more for the “Michelle Obama Trail”. This IS the cause of the out of control inflation that is crushing poor and middle class Americans.
Now the quandary is that rapidly raising interest rates (which they are doing) is the only remedy to ever increasing inflation but that can cause banks and companies to collapse and a severe economic downturn. So pick your poison; 10% inflation or double digit mortgage rates. Until this perverse and wasteful government spending is seriously curtailed and cut backed we will face another recession and maybe even worse; i.e. another 2008 type meltdown.