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Americans are poised to foot a nearly $300 billion deal with President Biden’s expected announcement on Wednesday to forgive thousands in federal student loan debt and extend a repayment pause to next year.
According to the Penn Wharton Budget Model, a one-time maximum debt forgiveness of $10,000 for borrowers who make less than $125,000 will cost around $300 billion for taxpayers.
The precise details of Biden's plan were being kept to an unusually small circle within the Biden administration and were still not finalized on the eve of the announcement, sources told the Associated Press.
The nation's federal student debt now tops $1.6 trillion after ballooning for years. More than 43 million Americans have federal student debt, with almost a third owing less than $10,000 and more than half owing less than $20,000, according to the latest federal data.
According to a recent analysis from the Committee for a Responsible Federal Budget (CRFB), the $10,000 forgiveness plan would undermine the recently passed Inflation Reduction Act by consuming nearly 10 years of deficit reduction and wipe out disinflationary benefits.
As the Washington Post notes, there are several reasons why the Biden administration is carefully weighing the decision on broad student loan cancellation.
1. Student loan forgiveness could increase Inflation
2. Student loan cancellation could be perceived as wealth redistribution
3. Americans without student loans may not want to pay for other people’s student loans