https://studentloanjustice.medium.com/no-student-loan-cancellation-will-not-cause-inflation-f46a331ea5a0
Both arguments are asinine. The claim that cancelling student loans will benefit the wealthy is easily disproven in this article, and won’t be repeated here. The argument that cancelling student loans will only accelerate the current inflationary trend, however, has yet to be addressed, but there are at least three different arguments that demonstrate clearly that the claim is ridiculous on it’s face.
First: The average student loan borrower has a monthly payment of roughly $400/month. According to the Bureau of Labor Statistics✎ EditSign✎ EditSign, the average monthly expense for an average household (2.5 people) in the U.S. was $5,875. Annual inflation, currently, is 8.5%. This leads to an increase in monthly expenses for the average household of about $500/month. The monthly increase in these borrowers income that would result from student loan cancellation would not even cover the increase in their monthly expenses due to inflation. Therefore, even total student loan cancellation could not contribute to additional consumption (demand), and thus could not contribute to inflation.
The large majority of student loan borrowers are in the bottom 80% of earners, and they are- as everyone in the middle and lower income levels is- feeling the brunt of this inflation most of all. According to the Department of Education’s former Chief Operating Officer, Wayne Johnson, 85% of these borrowers were underwater on their loans (ie unable to pay, or paying but with increasing loan balances) before the pandemic- so these people were struggling well before Covid, and the inflation we are seeing now only exacerbates their plight- even with student loan cancellation. large majority of student loan borrowers are in the bottom 80% of earners, and they are- as everyone in the middle and lower income levels is- feeling the brunt of this inflation most of all.
According to the Department of Education’s former Chief Operating Officer, Wayne Johnson, 85% of these borrowers were underwater on their loans (ie unable to pay, or paying but with increasing loan balances) before the pandemic- so these people were struggling well before Covid, and the inflation we are seeing now only exacerbates their plight- even with student loan cancellation.
The federal student loan system is, by all rational metrics, catastrophically failed. At a minimum, standard bankruptcy protections should be returned to these loans immediately. Ultimately, however, the President will have to cancel the loans broadly, deeply, and perhaps totally. It would be far better for the country to act boldly now, rather than string this problem out through yet another election.
We can do better than this.
