Keystone Today

In August, President Joe Biden announced his student loan forgiveness plan in which eligible borrowers can get up to $10,000 in debt canceled, and $20,000 if they went to school on a Pell Grant.

Due to rising inflation, the plan has sparked outrage from Republicans and criticism from economists.

During a recent White House press conference where the plan was discussed, Deputy Director of the National Economic Council (NEC) Bharat Ramamurti said that the loan relief program will be “paid for and far more by the amount of deficit reduction that we’re already on track for this year.” 

Experts spoke with FOX Business, saying that Biden's plan is expected to cause an incline in college tuition prices and add to the inflation crisis. 

"Students will likely feel liberated to borrow more money on the assumption of future loan forgiveness, and universities will take advantage of the additional borrowing by raising tuition," Brian Riedl, a senior fellow in budget, tax and economic policy at the Manhattan Institute, told FOX Business. "This is pretty similar to the fact that historically 60% of all student aid increases have been captured with tuition hikes, and this will be treated like an increase in student aid moving forward, which suggests that 60% will be countered by tuition hikes.”

Costs have increased across the board, including in Pennsylvania; a report by the Joint Economic Committee said. Pennsylvanians have seen the costs of household goods increase 11.2% since the beginning of 2021.

Last month, Consumer Reports released Consumer Price Index numbers that showed 8.5% inflation in July. This number represents change in prices for things like food and energy. The report also showed that 97% of Americans are worried about price increases from inflation. 

A recent survey published by CNBC found that nearly 59% of Americans are concerned that student debt cancellation will only worsen existing inflation. The survey was conducted Aug. 4-15 and involved 5,142 respondents. It was conducted by Momentive.

Jason Furman, a Harvard professor and former chairman of the Council for Economic Advisers under the Obama administration, recently took to Twitter to question with criticism overspending during rising inflation.

“Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless,” Furman said in an Aug. 24 tweet, among several others who criticized the Biden administration’s tactics and figures they released. “Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.”

The Committee for a Responsible Federal Budget published a report that said the Inflation Reduction Act will reduce deficits by approximately $275 billion, but it went on to say that the White House’s announcement to cancel student debt could negate this.

The report found that $10,000 worth of student debt cancellation would nullify deflationary benefits that have come through the recently passes Inflation Reduction Act. The report added that student debt cancellation could add 15 basis points of inflation right away, but it could also add increases in the future. 

Additionally, the report noted that while there was no inflation in the month of July, the inflation level has “surged at record levels” this year, and core inflation is still higher than the targeted figure.

On Aug. 16, the Department of Education reported that $32 billion in student loan relief had been approved to date under the Biden administration. Of that amount, $9.6 billion was approved through the Public Service Loan Forgiveness program.