Debt Cancellation Is Costly, Regressive, and Inflationary

According to press reports, President Biden is seriously considering cancelling a large swath of student debt – perhaps more than the $10,000 per borrower he originally proposed during the campaign. We previously estimated that cancellation of $10,000 per borrower would cost roughly $250 billion, cancellation of $50,000 per borrower of debt would cost about $950 billion, and full cancellation would cost roughly $1.6 trillion. This cancellation would be on top of the current repayment pause and other targeted cancellation policies, which will have already cost the federal government at least $150 billion.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

Student debt cancellation may be an extremely appealing political talking point, but it is not good policy. It is costly, inflationary, poorly targeted, and fails to address the root problems in our higher education financing system.

Full debt cancellation would be a massive hand-out to rich doctors and lawyers, would worsen our inflation crisis, and would cost almost as much as the entire 2017 tax cuts. Even partial debt cancellation would be costly, regressive, and inflationary. Forgiving $10,000 per person of debt would cost as much as universal pre-K or a full extension of the expanded ACA subsidies. 

Either the President is serious about reducing deficits and getting inflation under control, or he is not. The White House can’t have it both ways. We need to be focusing on a serious and effective agenda that prioritizes sound policies, not poorly targeted political giveaways.


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