SEPTEMBER: White House refuses to explain who will pay for Biden’s $500 million student loan bailout
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President Biden and White House officials remain tight-lipped about how they plan to pay off $10,000 to $20,000 in student debt for millions of Americans.
Despite unveiling the policy last week, administration officials have yet to explain how Biden’s long-term student loan installment will be paid. Economists say that since the proposal calls for the government to forgive the loans, taxpayers are likely to be on the hook as principal and interest pile up on the nearly $31 trillion in existing U.S. debt.
“If this ends up being added to the national debt, it will only increase the interest costs needed to default on that number,” said Brian Riedl, a senior economics fellow at the center-right Manhattan Institute. “All of this will eventually raise taxes because at some point you’re going to have to find a way to pay off that debt.”
Fox News Digital has reached out to the White House several times about how it plans to pay off student loan debt or whether future tax hikes will be needed. Administration officials have yet to provide an explanation, but say the delivery is “fully paid for” through deficit reduction that is occurring separately from the new document. The deficit reduction comes after trillions in temporary federal spending to combat COVID-19.
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“It pays off and more for the amount of deficit reduction we’re already on track for this year,” said Bharat Ramamurti, deputy director of the National Economic Council. “As I said, we’re on track to reduce the deficit by $1.7 trillion this year. That means, practically speaking, compared to the year before, $1.7 trillion more is coming into the Treasury that go out. And we’re using a portion of that, a very small portion, to provide relief to middle-class families, under the president’s plan.”
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Biden announced plans to pardon last week $10,000 in student debt for borrowers earning less than $125,000 a year. Pell Grant recipients will receive $20,000 in debt relief, as long as their income is below the $125,000 threshold. Administration officials say no individual or household in the top 5 percent of incomes will benefit from the decision.
The white house it also extends a pause in student loan payments until the end of the year. Coinciding with the announcement is a new proposal from the Department of Education that would allow borrowers to limit their degree loan repayments to 5% of their monthly income, adding to the cost to taxpayers of the handout.
Administration officials say the cost of Biden’s student loan surrender cannot be fully accounted for, as it is unclear how many borrowers will choose to take advantage of the opportunity. They say it’s still unclear how many people would have paid back the full amount of their loans over time anyway.
“All of this, as far as the costs are concerned, will also depend on how many canceled loans were expected to be repaid,” White House press secretary Jean-Pierre said.
The National Taxpayers Union Foundation disagrees, however. The group released an analysis earlier this week estimating that if student loan forgiveness adds nearly $330 billion to the deficit over the next decade. A budget model of the Wharton School of the University of Pennsylvania de Business claims, the average cost per taxpayer will be $2,085.
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But that might be on the low end. The Commission for a Responsible Budget put the cost of the sheets between 440 billion and 600 billion dollars.