Economists say taxpayers are likely on the hook for it. President Biden and White House officials have remained silent on how they plan to fund the cancellation of up to $20,000 in student debt for millions of Americans.
Despite the fact that the policy was announced last week, administration officials have yet to explain how Biden’s student loan giveaway will be paid for in the long run. Economists believe that because the proposal calls for the government to forgive the loans outright, taxpayers will be on the hook as the principle and interest are added to the nearly $31 trillion in existing U.S. debt.
“If this ends up being added to the national debt, it’s just going to drive up the interest costs needed to not default on that figure,” said Brian Riedl, a senior fellow in economics at the center-right Manhattan Institute. “All of that is eventually going to drive up taxes because at some point you’ll have to figure out a way to pay that debt.”
Fox News Digital has asked the White House several times how it plans to pay for the student loan rescue package and whether future tax hikes are necessary. Officials from the administration have yet to provide an explanation, but they have stated that the handout is “fully paid for” through deficit reduction that is occurring separately from the new handout. The deficit reduction comes after trillions of dollars in temporary federal spending to combat COVID-19.
“It is paid for and far more by the amount of deficit reduction that we’re already on track for this year,” said Bharat Ramamurti, the deputy director of the National Economic Council. “As I said, we’re on track for $1.7 trillion in deficit reduction this year.
That means, practically speaking, compared to the previous year, 1.7 trillion more dollars are coming into the Treasury than are going out. And we’re using a portion of that — a very small portion of it — to provide relief to middle-class families, consistent with the president’s plan.”
Last week, Biden announced plans to forgive $10,000 in student debt for borrowers earning less than $125,000 per year. Pell Grant recipients will receive $20,000 in debt relief if their income is less than $125,000. According to administration officials, the decision will benefit no one in the top 5% of earners.
The White House has also extended a complete ban on student loan payments until the end of the year. Concurrent with the announcement is a new Education Department proposal that would allow borrowers to cap undergraduate loan repayment at 5% of their monthly income, increasing the cost of the handout to taxpayers.
“All of this as when it comes to costs will also depend on how many of the loans canceled were actually expected to be repaid,” said White House Press Secretary Jean-Pierre.