Economists Remain Divided , on How Student Debt Forgiveness , Will Impact Inflation.
NBC reports that the Biden administration's
student loan forgiveness plan will either make
inflation worse or have little impact at all. .
According to the Committee for a Responsible
Federal Budget (CRFB), the plan would , “wipe out the disinflationary benefits
of the Inflation Reduction Act.”.
The CRFB estimates that the debt
forgiveness action would cost an , "astronomical $400 to $600 billion." .
Previously, the group estimated that
$10,000 in forgiveness would add 0.15%
to a commonly used gauge for inflation. .
NBC reports that experts at the Roosevelt Institute
and the Center for American Progress
disagree with the assessment by the CRFB.
They argue that the impact of inflation
would be small and offset by student loan
payments resuming on January 1 of 2023.
Sarah House, senior economist at Wells Fargo, points out that
the outcome will be hard to determine because there are , “so many moving pieces to
the inflation picture right now.".
According to House, one of the unknown
factors is how cancelled student debt could
change the way consumers spend their money.
NBC reports that a reduction in debt
could encourage people to spend more
and boost the economy that way.
According to House, the cancelling of student debt only , "addresses the symptom rather
than the cause of student debt.".
This doesn’t do anything to encourage
colleges to help restrain costs and limit
the amount of debt that students
are coming out with in college, Sarah House, Senior economist at Wells Fargo, via NBC