McConnell claims Biden ‘student loan socialism’ will worsen inflation
Senate Republican Leader Mitch McConnell said on Wednesday that President Joe Biden’s plan to eliminate student loan debt would only make inflation worse for families struggling to cope with higher prices.
“President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt,” McConnell said. “This policy is astonishingly unfair.”
The president announced an initiative to forgive $10,000 in undergraduate student loans for those Americans earning less than 125,000 a year.
Americans could see $20,000 canceled if they went to school on a Pell Grant, federal assistance offered to students who exhibit exceptional financial hardship.
But McConnell said the median American holding student loans makes significantly more money than the median American, meaning that the highest earners would benefit from this windfall.
“President Biden’s inflation is crushing working families, and his answer is to give away even more government money to elites with higher salaries. Democrats are literally using working Americans’ money to try to buy themselves some enthusiasm from their political base,” McConnell continued in a statement.
GOP Rep. Andy Barr of Lexington characterized the loan forgiveness plan as a transfer of wealth to the highest earners at the expense of blue-collar workers.
“Nearly a third of student loan debt is held by the top 20% of earners and 56% of student debt is held by households with graduate degrees,” Barr said. “Biden’s cynical politically motivated ploy would bail out the wealthiest 20 percent of American households at the expense of other hardworking low- and middle-income Americans, setting a dangerous precedent for wealthy Americans to go to college and later expect non-college educated working families to pay off loans that they promised to pay back. I guess the left has abandoned its ‘tax the rich’ mentality.”
A Penn Wharton study this month estimated that a one-time forgiveness of $10,000 per borrower for those earning less than $125,000 would cost the U.S. around $300 billion. The Committee for a Responsible Federal Budget placed the tab at roughly $230 billion.
Larry Summers, a former treasury secretary in the Clinton administration, warned this week that the plan could agitate inflation just when prices in some sectors were beginning to show declines. The U.S. inflation rate slid to 8.7% in July from a 40-year high of 9.1% in June.
“Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college. Student loan debt relief is spending that raises demand and increases inflation,” Summers cautioned before Biden’s announcement.
Barr said the plan did nothing to discourage colleges from raising tuition, which he attributed to excess federal subsidization of higher education.
