?????? Biden cancels student loans.... at the expense of the public purse

Joe Biden?has presented his plan to?eliminate by presidential decree?the student debt owed to the federal government by millions of people. Specifically, the plan will?eliminate up to $10,000 dollars?of outstanding debts with the government for all those whose individual annual income is?less than $125,000 dollars. This amount will also be increased to $20,000 if these individuals received a?"Pell Grant", a financial aid granted to students from low-income households.

In this way, the announced plan is expected to benefit?43 million people?who owe a total of?$1.6 trillion dollars?in debts for the payment of their studies. Fifteen million people will see their?loans completely canceled.

In addition to this debt forgiveness, the President will also extend the repayment and interest payments on the debt until the end of the year. The forgiveness will also be tax exempt.

In total, estimates suggest that this plan could cost the government up to nearly?$500 billion. In budgetary terms it is the?largest executive action taken in peacetime.

Why is it important?

The plan has been received with?great joy?within the Democratic Party, let us not forget that in a few months the mid-term elections will be held. Moreover, this policy is a?long-standing concession to the Democratic factions?furthest to the left.

Republicans, on the other hand, have criticized the action because, they say, it ultimately forces workers who have already paid their debts or who never assumed them – for example, because they did not go to college – to pay for this presidential pardon.

"Worse than the cost is the moral hazard and terrible precedent this sets. Those who will pay for this forgiveness are the tens of millions of Americans who didn't go to college, or paid off their debt, or scrimped and saved to pay for college, or chose lower cost schools to avoid a debt trap. This is a bailout of college graduates paid for by plumbers and FedEx drivers." –?Wall Street Journal Editorial Board

In addition, it is unclear what will happen going forward. Will the?debt forgiveness?turn into higher tuition subsidies on a recurring basis over time? Or are we simply looking at a?pre-election giveaway? Even some economists usually aligned with the White House, such as former Clinton administration Treasury Secretary,?Larry Summers, have criticized the measure because it will?force future spending cuts or tax increases. Not to mention the fact that it is clearly an?inflationary?measure, especially in the medium and long term.

In any case, and beyond the opinion one may have about student loans, the measure, as it has been proposed, seems to be nothing more than?an attempt to buy votes.