Student Loan Forgiveness Benefits 40-M U.S. Debtors

More than 40 million Americans could see their student loan debt reduced — and in many cases eliminated — under the long-awaited forgiveness plan President Joe Biden announced Wednesday, a historic but politically divisive move in the run-up to the midterm elections, Collin Brinkley, Seung Min Kim and Chris Megerian reported for the Associated Press (AP).

Photo Insert: Biden's move is seen as an unprecedented attempt to stem the tide of America’s rapidly rising student debt, but it doesn’t address the broader issue — the high cost of college.

Fulfilling a campaign promise, Biden is erasing $10,000 in federal student loan debt for those with incomes below $125,000 a year, or households that earn less than $250,000. He’s canceling an additional $10,000 for those who received federal Pell Grants to attend college.

It’s seen as an unprecedented attempt to stem the tide of America’s rapidly rising student debt, but it doesn’t address the broader issue — the high cost of college.

Republicans quickly denounced the plan as an insult to Americans who have repaid their debt and to those who didn’t attend college. Critics across the political spectrum also questioned whether Biden has authority for the move, and legal challenges are virtually certain.

But because the Biden plan is limited to $10,000 for people making less than $125,000 a year, the effect on inflation, at least in the near term, should be negligible, some economists say, Allison Morrow reported for CNN.

"The end of the moratorium will weigh on growth and inflation, while the debt forgiveness will support growth and inflation," Moody's Analytics chief economist Mark Zandi told Matt Egan of CNN. "The net of these cross-currents is largely a wash."

Not everyone agrees. Jason Furman, a Harvard professor and former top economic adviser to President Obama, fired off a series of critical tweets Wednesday.

"Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse."

Biden also extended a pause on federal student loan payments for what he called the “final time.”

The pause is now set to run through the end of the year, with repayments to restart in January. “Both of these targeted actions are for families who need it the most: working and middle-class people hit especially hard during the pandemic,” Biden said at the White House Wednesday afternoon.

WEEKLY FEATURE : MVP Group Keeps Lights On During Pandemic