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White House officials say President Biden’s decision Canceling between $10,000 and $20,000 of student debt for millions of Americans is entirely paid for due to a lower federal deficit, an argument that suggests the full cost of the policy will simply be piled on the national debt.
Fox News Digital has contacted the White House several times over the past week to find out how it plans to pay the student loan or if future tax hikes will be needed.
The White House now says the aid is “fully paid for” thanks to the deficit reduction that is already underway.
“It is paid for and much more by the amount of deficit reduction that we are already on track for this year,” said Bharat Ramamurti, deputy director of the National Economic Council.
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President Biden tugs at his shirt collar inside the White House.
(Getty Pictures)
“We are on the right track to $1.7 trillion in deficit reduction This year. This means, in practice, that compared to the previous year, 1,700 billion dollars more enter the Treasury than it leaves. And we’re using some of it – a very small part – to relieve middle-class families, according to the president’s plan. »
Economists say the White House’s comments and reluctance to describe offsets for student debt, such as tax increases or budget cuts, indicate that it simply plans to pile the cash on the federal deficit of $726 billion.
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“They’re just looking for any story they can tell that gets them away from the fact that they’re making the nation’s finances worse,” said Marc Goldwein, senior policy director at the nonpartisan Committee for a Budget. responsible federal. “It’s going to make the deficit worse. There’s no way around it.”
Under Biden, the deficit has shrunk primarily because Congress chose not to appropriate trillions in temporary coronavirus spending as it did at the start of the pandemic in 2020. Economists say the White House is arguing that cutting the deficit gives the administration more money to spend on programs, like the student loan. But that means it won’t go to debt reduction instead, forcing future taxpayers to foot the bill.
Rep. Ilhan Omar, D-Minn., joins a protest outside the White House, calling for cancellation of student debt, April 27, 2022.
(Reuters/Evelyn Hockstein)
“The analogy is a family that goes into debt for a $100,000 medical emergency, and the next year they buy a $50,000 sports car and claim it’s ‘free’ because they don’t. spends over $100,000 a year on medical emergencies,” said Brian Riedl, senior economics fellow at the center-right Manhattan Institute.
Biden last week announced his intention to pardon $10,000 in student debt for borrowers earning less than $125,000 per year. Pell Grant recipients will receive $20,000 in debt repayment, provided their income is below the $125,000 threshold. Administration officials say no individual or household in the top 5% will benefit from the ruling.
The White House also extends a pause on student loan repayments until the end of the year. Coinciding with the announcement, a new Department for Education proposal allows borrowers to cap undergraduate loan repayment at 5% of their monthly income, raising the cost of aid for taxpayers.
Administration officials say the cost of Biden’s student loan can’t be fully factored in because it’s unclear how many borrowers will choose to take advantage of the opportunity. They say it remains unclear how many people would have repaid the full amount of their loans over time anyway.
“All of this, as with the costs, will also depend on the number of canceled loans that actually needed to be repaid,” said Karine Jean-Pierre, White House press secretary.
Activists demonstrate outside the White House to demand the cancellation of student debt, April 27, 2022.
(Reuters/Evelyn Hockstein)
But others were able to make estimates. The National Taxpayers Union Foundation released an analysis earlier this week estimating that student loans add nearly $330 billion to the deficit over the next decade. A budget model by the Wharton School at the University of Pennsylvania of Business says the average cost per taxpayer will be $2,085.
But it could be on the low end. Responsible Budget Committee put the cost of alms between 440 and 600 billion dollars.
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“If it ends up adding to the national debt, it will only add to the interest costs needed to not default on that figure,” Riedl said. “All of this will eventually drive up taxes because at some point you’ll have to find a way to pay that debt.”