Biden’s pause on student loan repayments ‘adds fuel to the inflation fire,’ expert says

President Biden’s decision to extend a pause once again on federal student loan payments is only worsening the current inflation crisis, and his consideration of canceling the debt altogether could have a disastrous impact on the economy, one expert warns.

Earlier this month, the U.S. Department of Education announced an extension of the pause on student loan repayment, interest and collections through Aug. 31. Biden said in a statement the U.S. is "still recovering" from the years-long coronavirus pandemic, necessitating further leniency on loan payments.

BIDEN MORE OPEN TO CANCELING STUDENT DEBT ‘THAN EVER BEFORE,’ SCHUMER SAYS

The move comes as progressive Democrats call for a permanent cancellation of all student loan repayments. 

Rep. Pramila Jayapal, D-Wash., wrote over the weekend that student debt cancellation is "racial justice," "gender justice" and "economic justice."

White House press secretary Jen Psaki said during a press briefing earlier this month that the Biden administration has "not ruled out" canceling student loan debt on a "wide scale" via executive action.

Biden has previously said he supports canceling up to $10,000, but he argued it should be done through congressional action.

E.J. Antoni, a research fellow in regional economics at the Heritage Foundation, told Fox News Digital that the pause on repayments is contributing to the current inflation crisis, which rose a crippling 8.5% last month.

"This latest blunder by the Biden administration (further extending the moratorium on student loan repayments) is adding to price increases in at least three ways," Antoni said. "First, forestalling the repayment of debt adds fuel to the inflation fire by putting upward pressure on the money supply, and therefore inflation."

"Second, after repeatedly promising not to extend the moratorium, this latest extension is just another broken promise by the Biden administration," he continued. "The unpredictable and irrational behavior of the executive branch has created uncertainty for markets, which reduces investment, and consequently output, and that puts upward pressure on prices." 

"Third, delaying student loan repayments also removes an incentive for many people to re-enter the workforce, further contributing to labor costs and higher prices across the economy," he added.

Antoni argued that an outright cancellation of the debt would only benefit higher income earners and burden lower and middle-class taxpayers. 

"Concerning the potential ‘cancellation’ of student debt, we would do well to remember that that is a euphemism for burdening the taxpayer with those loans," he said. "It would unfairly yoke $2 trillion around the necks of low- and mid-income Americans at the benefit of those with higher-than-average incomes. Additionally, it would only exacerbate the inflationary pressures described above."

The new extension applies to more than 43 million Americans who owe a combined $1.6 trillion in student debt held by the federal government, according to the latest data from the Education Department. 

The Trump administration initially gave Americans the option to suspend loan payments in March 2020, and Congress made it automatic soon after. The pause was extended twice by the Trump administration and twice more under Biden.

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Brian Riedl, a senior fellow in budget, tax and economics at the Manhattan Institute, said the student loan pause or possible cancellation is "not helpful" but also not a major driver of inflation, and that the real problem is the impact it has and will have on American taxpayers.

"The problems with student loan forgiveness are that the policy would transfer these liabilities over to the taxpayers (raising deficits and ultimately taxes), disproportionately benefit upper-income attorneys and doctors, and also send a signal to current and future college students that they should borrow even more on the expectation of future loan forgiveness programs," Riedl told Fox News Digital.

Fox News’ Bradford Betz and The Associated Press contributed to this report.