Many student loan borrowers' debt will vanish. What happens next?
https://www.nbcnews.com/data-graphics/student-loan-debt-america-charts-rcna44439https://www.nbcnews.com/data-graphics/student-loan-debt-america-charts-rcna44439As President Joe Biden announces his plan to forgive student debt, economists have already begun debating whether the action could compound the surging inflation that continues to bedevil the U.S. economy.
Among the most prominent voices warning that the forgiveness would lead to increased inflation has been Larry Summers, former treasury secretary and Harvard University president emeritus, who voiced his opinion in a series of tweets Monday.
"I hope the Administration does not contribute to inflation macro economically by offering unreasonably generous student loan relief," he wrote. He said the debt relief would translate into increased spending, which would in turn increase overall demand and, thus, inflation.
The Committee for a Responsible Federal Budget, a nonpartisan, nonprofit organization focused on fiscal policy issues, echoed the concerns, writing on Aug. 16 that $10,000 of debt cancellation would add 0.15% to one common measure of inflation, the Personal Consumption Expenditure, or PCE, price index, with a compounding effect over time.
The PCE price index is a more comprehensive measure for the price of goods and services than the more commonly watched measure of inflation, the Consumer Price Index, or CPI. Unlike the CPI, the PCE has not shown signs of slowing.
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