More than eight million people have applied for the Biden administration's debt forgiveness program. While the website officially launched this week, its future is far from certain.
Economists on both sides of the aisle say forgiving student debt will increase inflation. The program is also facing a number of court challenges.
Qualified borrowers could soon get up to $10,000 or $20,000 worth of college loans wiped out. More than 40 million people may qualify for some student loan forgiveness.
"I'm surprised it's actually not more than that due to the gratuitous nature of this handout," said EJ Antoni, a research fellow for Regional Economics at The Heritage Foundation. "We're talking about up to 40,000 for families making up to a quarter of a million dollars a year."
The plan has been criticized for catering to those who had the advantage of going to college. But another criticism is how the program, which could cost $400 billion over the next decade, might impact already high inflation
"Every time Congress and the president spend a dollar that we don't have and they need to borrow that money, that requires the federal reserve to raise interest rates harder and faster in order to keep inflation under control," Antoni explained. "The more the Fed slams on the brakes of the car in this economy, the more people who are going to go through the windshield. We have countless Americans who can't afford a home because interest rates have gotten too high given home prices right now."
Six Republican-led states have sued to block the program. President Biden defended the plan when the application process launched this week.
"Republican members of Congress and Republican governors are trying to do everything they can to deny this relief even to their own constituents," Biden said. "As soon as I announced my administration's student debt plan, they started attacking it, saying all kinds of things. Their outrage is wrong and it's hypocritical. I will never apologize for helping working Americans and middle-class people as they recover from the pandemic."
The timing can't be ignored. With less than three weeks before pivotal midterm elections, Democrats are hoping the plan resonates with voters.
Nathan Gonzales is the editor and publisher of Inside Elections.
"Particularly younger voters are those who are still paying off those debts. If they feel like that it is going to help that could be a boost," Gonzales said. "At the same time, the net result might not be what Democrats expect because there are folks who believe it's not the right thing to do and it's not fair to those who haven't had that debt."
While applications continue to pour in, the program could still end up in limbo as multiple court cases work their way through the system.
Meanwhile, the government pause on loan repayments that began during the pandemic formally ends on Jan. 1.
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