Millions of student borrowers are poised to start paying off their loans next month unless President Biden cancels debt for seventh time or extends moratorium,
When the Covid-19 pandemic first hit America and a massive wave of unemployment swept through the country, US President Donald Trump has imposed a moratorium on student loans. Many economists believed that the economy could slip into recession if revenues continued to pay off debt, which was essentially state-owned.
Now, with inflation driving up consumer prices, some of these economists still see student loan payments at risk. consumption rate, as many people pay more for housing, food and utilities, says Daniel J., financial advisor at Cornerstone Financial Services. Milan told Forbes that “A borrower may feel more stressed when it comes to keeping up with their student loan payments.,
Candidate against President Biden on student loans
President Biden champions proposals to solve student loan crisis and provides forgiveness up to $10,000 in student loansMany politicians, workers and borrowers have not received such an announcement.
Let’s clarify who is affected by the student loan crisis:
99% of people on government student loans didn’t go to the Ivy League
97% have a low or middle income
40% have not completed their studies
Around 9 million people aged 50+ take out a student loan
— Progressive Caucus (@USProgressives) August 21, 2022
President Biden’s administration since he took office Cancel commit is backHe argued instead that if Congress passed a loan forgiveness bill, he would like to sign it,
This is a far cry from the platform used to elect President Biden, which included a proposal from Elizabeth Warren.Immediately cancel the student loan of at least $10,000 per person,
Can student loan cancellations increase inflation?
As November draws to a close, several Republican leaders have criticized the idea of debt relief, saying it is one Cheaper for the rich and contributes to inflation,
Proposal to implement debt relief universally, i.e. regardless of income, This is partly done to increase the compatibility of the programRepublicans, however, show no interest in taking more.”progressive“Plan canceling up to $.25,000 for those earning less than $75,000 annuallywhich benefits the “bottom 40 percent of the income distribution.” [who would] Rgets almost double the moneyThis proposed policy has been touted by JPMorgan Chase, with the only problem being that it ignores the ones it contains. Income groups with debts greater than $100,000compared to those at the top of the income distribution, who have significantly fewer.
The personal and economic cost of getting rid of student loans Stop
Average prices remained stable in July, stopping the historic price rally An increase of 8.5 percent compared to 12 months ago,
one of the reasons for this President Biden can choose Not extending the moratorium or continuing to deal with the cancellation would reduce domestic purchasing powerReduction in demand that some economists Hopefully the prices will fall. It’s the same monetary principle that prompted the Federal Reserve to raise interest rates by 1.5 percent in just two short months earlier this summer. With less money flowing through the economy on the demand side, Prices need to fall to cover supply,
Supply chains struggling to rebuild after the devastating effects of the COVID-19 pandemic, coupled with high energy prices, have contributed to historic inflation – but there are other factors to consider as well.
Forcing borrowers to pay down their debts would be a particularly brutal way to depress prices, especially considering how corporate greed has contributed to the current financial and student loan crisis.
Take, for example, monopolies and highly consolidated corporate consolidations. Tyson Foodswho delivers Almost a fifth of all beef, chicken and pork in the US have reported above-average price increases between 2021 and 2022. The company has booked billions in profits, their quarterly reports show that they are Earn revenue at levels well above your labor, transpiration, and production costs.
CFO of Constellation Brands Garth Hankinson said at an investor call that the company “Price as much as we think the consumer can absorbIn other words, the increase in their prices was not only based on their . cost and not the highest price that the average consumer was willing to pay for their goodsMore ethical lines come to mind when looking at a company like Constellation Brands that sells a highly addictive product: alcohol,
So, in an era of 1920s-style income inequality, President Biden can use the economic pain of student loan borrowers to offset inflation.
Last month, average prices rose 9.1 percent from July 2021 and wages rose 5.2 percent – meaning workers did Average wage cut of 3.9 percent seen,
Inflation has also had a significant impact on personal savings.
In December 2021, Personal savings accounted for 8.7 percent of total income, or about $1.5 trillion, Savings rate surged throughout 2021 as third stimulus check and increased child tax credits distributed to millions of households. Each time these payments were made, the homeowners chose to save some of it. After payments expire in early 2022, The savings rate was reduced from 5.8 percent in January to 5.1 percent in JuneTotal family savings also fell to $944.5 billion in June. The lowest level was recorded in January 2021. Inflation has depleted personal savings, bringing the rate to one Not seen since the height of the 2008 financial crisis.
With an average student loan payment of $393 per month and 44 million borrowers in debt, Savings could be cut by $18 billion a month if mortium is removed. This poses even greater challenges to saving for low earners. Proponents of canceling student loans Don’t think that resume payments encourage an environment conducive to financial flexibility Through such potentially turbulent times in the market.