President Joe Biden said Wednesday that the U.S. government will forgive $10,000 in student loans for millions of debt-ridden former college students, fulfilling a promise he made during his 2020 White House campaign.
The move could boost support among his fellow Democrats in November’s congressional elections, but some economists said it could fuel inflation and some Republicans in the US Congress have questioned whether the president has the legal authority to cancel the debt.
Debt forgiveness would free up hundreds of billions of dollars in new consumer spending that could go toward buying homes and other big expenses, according to economists who said it would add a new wrinkle to the nation’s fight against inflation.
These actions are “for the families who need them most — working and middle-class people have been hit especially hard during the pandemic,” Biden said during a speech at the White House. He promised that no high-income households would benefit, addressing a central criticism of the plan.
“I will never apologize for helping working Americans and the middle class, especially not to the same people who voted for a $2 trillion tax cut that benefited mostly the wealthiest Americans and the biggest corporations,” Biden said, referring to Former President Donald Trump is considering tax cuts by Republicans.
Borrower balances have been frozen since the start of the COVID-19 outbreak, and as of March 2020, payments on most federal student loans are not required.
Many Democrats insisted that Biden forgive the $50,000 per borrower.
Republicans have largely opposed student loan forgiveness, calling it unfair because it would disproportionately help people with higher incomes.
“President Biden’s student loan socialism is a slap in the face to every family who donated to save for college, every graduate who paid off debt, and every American who chose a career or volunteered to serve in our armed forces to avoid take on the debt,” Senate Minority Leader Mitch McConnell said Wednesday.
The administration has not yet determined the price tag for the package, which will depend on how many people apply for it, White House domestic policy adviser Susan Rice told reporters.
Student loans taken out after June 30 of this year will not be accepted, she said.
White House press secretary Karin Jean-Pierre told reporters that the administration has the legal authority to forgive the debt under a law that allows such actions during a national emergency, such as a pandemic.
Elise Stefanik, a representative of the US Republican Party, called the plan “reckless and illegal”.