Economists Remain Divided on How Student Debt Forgiveness Will Impact Inflation

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.

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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.

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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