Student loan forgiveness? 'Fiscal recklessness' says Purdue's President Mitch Daniels

The Biden administration's student loan forgiveness program is "fiscal recklessness," Purdue University President Mitchell E. Daniels Jr. told Yahoo Finance.

"My biggest concern is the gross unfairness of what's been done," Daniels said on Yahoo Finance Live. "It's fiscal recklessness." He added: "Frankly, it's" illegal or unconstitutional.

Daniels ,73, served as the Republican governor of Indiana for two terms—from 2005-2013. He was appointed to his current role at Purdue in 2013 and has announced he will retire in January.

Forgiving student loans, he contended, will create a moral hazard for higher education institutions. "It'll likely only encourage colleges to continue charging more and students to borrow more, believing that they may well be excused from that obligation later," he said.

Last month President Biden announced the federal government will forgive $10,000 in student loan debt for individuals who make $125,000 or less and households earning no more than $250,000. Individuals who went to college on Pell Grants could qualify for $20,000 in debt forgiveness.

Biden also extended the pandemic repayment moratorium on federal student loans to December 31.

The move is seen by critics as largely political given that the mid-term elections are just two months away and inflation is at multi-decade highs.

But some Democrats have been calling for the President to cancel student debt all together following a pause on payments and interest in effect since March 2020. Republicans criticize the plan, claiming that loan forgiveness is inflationary.

In addition, Daniels said, the program creates "inequity of rewarding the currently wealthy or those who are destined to be wealthy."

"Half of this debt is in graduate education. So think doctors and lawyers, whatever they're earning now, what they're going to earn, and it'll be subsidized by those who didn't get that chance and never will," he said.

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