The debt relief isn’t counted as taxable income for federal income tax purposes, the White House says.
Some prominent economists, including former Treasury Secretary Lawrence Summers and Jason Furman, who was chairman of President Barack Obama’s Council of Economic Advisors, have been vocal critics, saying student debt forgiveness would stoke 40-year high inflation and may be unfair.
“Student loan relief is not free,” Furman tweeted on Aug. 19. “Part of it would be paid for by the 87% of Americans who do not benefit but lose out from inflation. Part of it would be paid for by future spending cuts & tax increases—with uncertainty about who will bear those costs.”
The Committee for a Responsible Federal Budget estimates Biden’s plan “would more than undo the deflationary pressures from the Inflation Reduction Act and add 0.15 percentage points of additional inflation in the near-term,” noted Sarah Foster, Bankrate analyst.
The Federal Reserve has been on an aggressive rate-raising cycle to cool demand, but giving people spending money could stymie that effort.
And those economists aren't the only ones worried. Hit already by hefty inflation, 59% of Americans are concerned student loan forgiveness will make inflation worse, according to a CNBC survey, conducted online by Momentive among a national sample of 5,142 adults from Aug. 4 to 15.
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