Commentary
Student loan forgiveness will cost taxpayers at least $519 billion and drive up inflation and tuition costs.
On Aug. 24, President Joe Biden issued an executive order forgiving up to $20,000 of student loan debt per borrower. This includes students who received federal student aid, Pell Grants, and $10,000 in debt cancellation to non-Pell Grant recipients. As many as 43 million borrowers will receive some relief, while about 20 million could have their entire student loan balance wiped out.
The executive order extended a COVID-era federal student loan payment pause until January 2023. The payment pause has been in effect since March 2020, with interest rates reduced to 0 percent. Typically, forgiven loans are taxable as income. However, under the American Rescue Plan, forgiven loans will not be taxable at the federal level. Some conservative states are considering imposing state income taxes, though….