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· Posted on
February 21, 2024

Biden's fulfilling his promise to wipe out student loans, but economists are capital S Stressed

45 million Americans have more than $2.31 trillion in student loans collectively and now Biden is launching a program to wipe the loans out.

What's the key learning?

  • 45 million Americans have more than  $2.31 trillion in student loans collectively and this has more than tripled since 2005
  • US president Joe Biden is launching a program for federal student loan debt forgiveness which means that people with student loans will have up to US$20,000 wiped from their debt, but economists are scratching their heads
  • With the government paying off this debt, it is effectively transferring the debt from graduates onto all taxpayers

👉 Background: This hits hard. 45 million Americans have more than  $2.31 trillion in student loans collectively. This has more than tripled since 2005. Sheeesh.

👉 What happened: Now the US president Joe Biden is launching a program for federal student loan debt forgiveness. Basically, it means that people with student loans will have up to US$20,000 wiped from their debt.

👉 What else: And while a lot of people are supportive of this move, lots of economists were left scratching their heads.

What's the key learning?

💡When the government spends money, somebody always needs to bear the costs. With the government paying off this debt, it is effectively transferring the debt from graduates onto all taxpayers.

💡And the US knows a thing or two about debt. It already has a national debt of $30 trillion. But it's not just about the national debt, it's also about inflation.

💡By pumping $400 - $600 billion USD into the economy, economists reckon it will likely lead to more spending. And that will potentially add to the current 40-year high in inflation... So it may take even more interest rate hikes to tackle it.

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