WASHINGTON, D.C. — Four Republican lawmakers are trying to prevent the Biden administration from carrying out a campaign promise to cancel $10,000 per borrower.
On Tuesday, Senator Mike Braun (R-IN), Senator Rick Scott (R-FL), Senator Cynthia Lummis (R-WY) and Senator John Barrasso (R-WY) introduced Senate Bill 4483. Deemed the “Debt Cancellation Accountability Act” by the group of lawmakers, this legislation would prevent loan forgiveness for federal student loans without the explicit appropriation of funds by Congress.
The legislation comes as President Joe Biden nears a decision on student loan debt forgiveness. Multiple sources told The Hill in late April that Biden was looking at canceling at least $10,000 in student debt. The latest reports indicate the plan would cap debt forgiveness to those who earned less than $150,000 last year, or $300,000 for married couples.
An analysis by the Federal Reserve found forgiving $10,000 per borrower would result in roughly 11.8 million borrowers – slightly more than 31% – having their entire balance eliminated.
“The Biden administration’s plan to ‘cancel’ millions in student loans will shift the debt of disproportionally higher-earning borrowers onto every American. This blatant wealth redistribution will only make inflation worse at a time when millions of Americans are already feeling the burden of record-high inflation. I’m glad to join Senator Scott on the Debt Cancellation Accountability Act to prevent the Biden administration from this executive overreach.“Senator Mike Braun
The Committee for a Responsible Federal Budget, a non-profit public policy organization, reported in February that canceling all of the $1.6 trillion in federal student debt would increase the inflation rate by anywhere from .1 to .5 percentage points. The current U.S. inflation rate is 8.6%.
While The Hill reports loan forgiveness wouldn't put money directly in pockets, it could affect the Fed's efforts to cool the economy.
“Loan forgiveness could provide people with more disposable cash,” David Lazarus, business and consumer news contributor for KTLA explained. “While it’s not a certainty that people would go on spending sprees, it would allow for more shopping. That, in turn, would strengthen the economy, making it even more difficult to bring down sky-high consumer prices.”
The legislation would prevent the U.S. Department of Education to waive, discharge, or otherwise reduce debts granted to two or more borrowers in an amount greater than $1,000,000, rather than on a case-by-case basis.
The Department of Education has recently discharged federal student loans for former students defrauded by schools. According to the Education Department, roughly 690,000 borrowers have had a total of $7.9 billion in student loans canceled through discharges due to borrower defense and school closures.
Biden will likely announce his plans regarding student debt in July or August, The Wall Street Journal reported Monday, close to the end of the student loan payment moratorium, which is currently set to expire on August 31.