(The Center Square) – President Joe Biden is considering canceling student loan debt for millions of Americans, a move critics say could increase inflation and further exacerbate the nation’s economic woes.

“I am considering dealing with some debt reduction,” Biden told reporters Thursday. 

Biden added that he would not forgive as much as $50,000 of debt per borrower, a figure that had previously been tossed around, but would take a “hard look” at another plan. He said he would release more details in the coming weeks. 

Meanwhile, as inflation remains high, bipartisan groups raise concerns about federal spending, and the latest economic reports show the economy shrank last quarter.

Critics say canceling student loan debt would further add to the federal debt and inflation, which is at the highest rate in decades.

“Student debt cancellation may be an extremely appealing political talking point, but it is not good policy,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. “It is costly, inflationary, poorly targeted, and fails to address the root problems in our higher education financing system.

“Either the President is serious about reducing deficits and getting inflation under control, or he is not,” she added. “The White House can’t have it both ways. We need to be focusing on a serious and effective agenda that prioritizes sound policies, not poorly targeted political giveaways.”

The economic pressures of inflation, fueled in part by the rash of federal debt spending in recent years, have Americans feeling the pinch. A recent study found that they are cutting back on discretionary spending to focus on the essentials. A newly released Gallup poll reports that Americans see inflation as a top concern.

“Americans’ confidence in the economy remains very low, and mentions of economic issues as the most important problem in the U.S. are at their highest point since 2016,” Gallup said. “Inflation, which registered as the top economic problem last month and continues to be, was previously at this level in 1984.”

A recent poll from NEXT Insurance reported that one in three small businesses have considered shutting down.

“According to a new survey by NEXT Insurance, small business owners across the United States are frustrated and stressed about inflation and the state of the economy,” the group said. “More than one-third have considered shutting down in the last 12 months. As prices continue to rise and supply chains continue to falter, many small business owners have been forced to work longer hours, raise prices, and even cut their own salaries just to stay afloat, our survey found. And a majority of small business owners believe the pain isn’t over.”

The Bureau of Economic Analysis reported this week that the economy shrank by 1.4%, contradicting predictions that the economy would grow by 1%. The data comes after the economy grew nearly 6% in 2021, a rebound year after the economic difficulties of the COVID-19 shutdowns.

The Federal Reserve has announced a series of interest rate hikes to combat inflation, but some experts doubt whether they will succeed or make the economy worse.

“An overheating U.S. economy will prompt the Fed to act more aggressively to combat inflation,” said Orphe Divounguy, chief economist at the Illinois Policy Institute. “Faster inflation will weigh down U.S. economic growth. However, more aggressive action at the Fed – to bring down inflation – could also plunge the economy into a recession. To tamp down inflation, either demand needs to decrease, or America needs a miracle increase in productivity. The latest economic data are likely to result in faster and more aggressive rate hikes.

“Unfortunately, the Fed has rarely been successful at bringing down inflation without precipitating a recession,” he added.

Those economic woes have raised the stakes for a potential debt cancellation. Biden, though, has already canceled some students’ debts. The Department of Education recently announced “immediate debt cancellation” for 40,000 borrowers via Public Service Loan Forgiveness after years of complaints about mismanagement of the program. While the number of forgiven borrowers was comparatively small, it raised more questions about a more significant cancellation.

MacGuineas added that even a middle ground partial debt cancellation would be costly.

“Full debt cancellation would be a massive hand-out to rich doctors and lawyers, would worsen our inflation crisis, and would cost almost as much as the entire 2017 tax cuts,” she said. “Even partial debt cancellation would be costly, regressive, and inflationary. Forgiving $10,000 per person of debt would cost as much as universal pre-K or a full extension of the expanded ACA subsidies.”

Regardless of whether Biden cancels student loan debt, experts say the U.S. may be in for a bumpy economic ride and even a recession.

“On one hand, this economic report shows that U.S. demand is resilient in the face of many headwinds – COVID, supply chains issues, labor shortages, a cooling global economy, a war in Europe, and rising commodity prices,” Divounguy said. “This is because personal consumption expenditures – roughly 70% of GDP – and investment actually increased despite the price increases. On the other hand, higher input costs for producers harm U.S. economic prospects. Higher inflation is pulling down U.S. output and U.S. exports. Uncertainty in Europe and a weaker global economy has also strengthened the U.S. dollar and U.S. imports are soaring. As a matter of simple accounting, lower net exports subtract from GDP.

“The increase in the trade deficit is also a sign that domestic demand is outstripping the economy’s productive capacity,” he added. “And that means the U.S. economy is overheating.”