You literally cannot compare what is happening here to student loans relief. The reason is pretty superficial: The Fed isn’t buying from the people who owe money, but from the people who are owed money. In terms of a student loan bailout, they would be buying student loan debt from lenders, not from the people who went to school. Critically, the money still has to be paid back. The only thing that would change is that people would owe the Fed money rather than whoever they owe it to now.
This also explains how its paid for. Literally every dime of the assets purchased will be paid for (with interest!) when they come due. That cash that was created will exit the financial system back into the Fed and the debt will disappear. There should be no difference from the debtors’ perspective.
So why would the Fed do it? Let’s say you are a lender. You owe someone 100K at the end of the month. You will receive 110K the following month, but only after your bills are due. This called being solvent but illiquid; you are good for the money but you don’t have the cash. The problem is that if a lot of companies start missing payments, other solvent companies will miss payments. On money everyone is good for! This kind of short term “injection” isn’t to make sure people make more money; its to make sure everyone has enough cash to pay each other. In the first knock-around no one makes money, and if they do in the second knock-around, its because there were investments to be made. (In practice, money is typically lost in the second knock-around.) Importantly, if someone owes 100K and expects 90K the following month, they will still fail to pay. The Fed avoids on-boarding this risk, though we’ll talk about what happens when the money never makes it back in in a second.
In simple terms, it buys people time without making them any richer.
So why couldn’t the Fed buy student debt and just cancel it? The first answer is—legal authorization to do so notwithstanding—they absolutely could. It just causes problems. Its the same reason the Fed tries to take on debt owed by solvent debtors: if the debts aren’t paid, there is an imbalance of money in the economy. That extra money drives inflation, meaning that goods cost more even if people technically have more money. Getting rid of 1.5T in financial assets is not as simple as swapping them around.
The difference here is between the government buying a building and refinancing a building that has already been bought. We can do this policy to student loans, but you won’t get what you want, unless what you want is to owe money to the Fed.
Proof of Burden 