Peter Schiff: Student Loan Forgiveness Is Pure Inflation

Last week, President Joe Biden announced a student loan forgiveness scheme. Peter Schiff appeared on NewsMax Real America with Dan Ball to talk about the cost of forgiving student debt and the growing recession.

Peter said that despite all of the claims to the contrary, this is just going to add to the inflation problem.

Biden claims that forgiving $300 billion in student debt won’t impact inflation. How is that going to work? Peter said it won’t. In fact, this is pure inflation.

All the money that students are not going to repay to the government, the government is just going to print. The Federal Reserve is going to print that money because this is like a giant tax cut for certain Americans because the government is not going to get the money that it was going to receive from the repayment of those loans.”

So, where will the government get the money? There are no spending cuts. The end result has to be more inflation.

Peter also pointed out the moral hazard inherent in this scheme. Moral hazard means a lack of incentive to guard against risk because people are protected from the consequences.

Remember, the only reason we have all these student loans is because the government provided them or guaranteed them. The only reason college is so expensive is because the government provides so much money in the way of loans. But now that they start forgiving loans, students are going to borrow more money than ever before. Because the colleges are going to tell the students, ‘Hey, who cares how much you borrow for college? You’re not going to have to pay any of it back anyway. So, we’re going to double your tuition, and don’t worry. Maybe we’ll throw in a free car.”

Meanwhile, people who were thinking about paying off student loans won’t do it.

Why would you want to pay for something when the government says, ‘Don’t pay for it. It’s going to be free!’? You’re a sucker if you pay. Everybody is going to borrow the money on the chance that the loan is going to be forgiven.”

Looking at the broader economy, Dan Ball noted that the housing market continues to crash. It’s clear the economy is slowing. And Joe Biden’s solution was simply to redefine recession. Peter emphasized that we are already in a recession.

Next year, maybe they’ll be calling it a depression. Or, they’ll be denying that as well. But I think that’s what it’s more likely to be. But it’s also an inflationary depression because inflation is going to get worse, not just because they’re making it worse with student debt forgiveness or more aid to Ukraine. As the economy ultimately implodes, they’re going to try to stimulate it. In fact, I think the reason they want to extend the moratorium on student loans is because they want to get through the next election — the midterms. They want to make sure the voters vote for the guys who gave them out a freebie. Well, also what’s going to be happening is the economy is going to be getting a lot worse and there’s going to be a lot of political pressure on the Federal Reserve to turn its attention from inflation to try to do something to prop up a weak economy.”