Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Somebody Has to Pay for Student Loan Forgiveness

  by    0   7

President Biden is expected to announce student loan forgiveness on Wednesday (Aug. 24). The plan will reportedly cancel $10,000 in student loan debt for anybody making less than $125,000 per year.

A lot of people think this is like waving a magic wand — poof — the debt is gone. But somebody has to pay and that somebody is the American taxpayer.

Nothing the government does is free. Ultimately, student loan debt forgiveness will add to the already massive budget deficit. That means Uncle Sam will have to borrow more money that taxpayers will have to repay, either in higher taxes or the inflation tax.

According to the budgetary model created by the Wharton Business School at the University of Pennsylvania, student loan forgiveness will cost between $300 billion and $980 billion over the 10-year budget window, depending on the amount forgiven and the income caps included in the plan.

If the Biden plan includes that $125,000 income cap, the budget model estimates that a one-time maximum debt forgiveness of $10,000 per borrower will cost around $300 billion. Increasing the maximum amount forgiven to $50,000 per borrower would increase the total cost to as much as $980 billion.

The Biden administration has already canceled about $32 billion in student loan debt for more than 1.6 million Americans through programs targeting public service workers, disabled borrowers, and students who were “defrauded” by specific schools.

Student loan debt in the US totaled $1.59 trillion at the end of the second quarter. Around 43 million Americans hold student loan debt. Less than a third of those owe less than $10,000.

The Biden administration will also reportedly extend the current pause on student loan payments through the end of the year. The Trump administration put student loan payments on pause early in the pandemic. The pause has been extended multiple times and was set to end on Aug. 31

When the US government stopped defaults and allowed borrowers to pause payments due to the COVID-19 pandemic, 11.1% of student loans were 90 days or more delinquent or were in default. This didn’t include the people who were in various deferment programs and were not counted as delinquent.

Student loan forgiveness does nothing to address the underlying problem – the high cost of tuition. In fact, forgiveness will likely make the problem worse.

The widespread availability of student loans drove up college tuition in the first place.  Studies have shown the influx of government-backed student loan money into the university system is directly linked to the surging cost of a college education.

As Peter Schiff pointed out in a podcast earlier this year, loan forgiveness would be like Christmas for colleges and universities. College administrators will figure, “Now we can really raise tuition because our students know they can borrow the money and they won’t ever have to pay it back.”

Schiff said it won’t likely be a one-time thing. This will create a moral hazard.

If they do it once, they’re going to do it again. Everyone is going to expect it. … The moral hazard there is nobody is going to pay for college. Nobody is going to work to try to avoid going into debt because you’re an idiot. Take on the debt! It’s going to be forgiven.”

Student Loan Bubble Free Report

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Is a Weak Yen Feeding the Global Gold Bull?

The gold price has been surging, with unprecedented central bank demand gobbling up supply. It has been a force to behold — especially as US monetary policy has been relatively tight since 2022, and 10-year Treasury yields have rocketed up, which generally puts firm downward pressure on gold against USD. 

READ MORE →

World Gold Council: “Blistering Central Bank Buying” Fuels Strong Gold Demand

Total gold demand hit an all-time high in 2023, according to a recent report released by the World Gold Council. Last week, the World Gold Council (WGC) released its Gold Demand Trends report, which tracks developments in the demand for and use of gold around the world. Excluding over-the-counter (OTC) trade, 2023 gold demand fell slightly from 2022 […]

READ MORE →

VIX – The Calm Before the Storm

The VIX, often referred to as ‘Wall Street’s fear gauge,‘ is currently portraying a sense of calm among investors, registering well below the 20 level. 

READ MORE →

Four States Consider Lifting Taxes on Precious Metals

Citizens of Georgia, Kentucky, Wisconsin, and Kansas may soon enjoy lower taxes on precious metals if recently introduced pro-metal bills are made law in 2024.

READ MORE →

Inflation Persists As Fed Signals Rate Cuts

printing pressThe U.S. Bureau of Labor Statistics (BLS) recently released two inflation reports highlighting inflation figures for December 2023. Here’s what they showed: 

READ MORE →

About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
View all posts by

Comments are closed.

Call Now