U.S. President Joe Biden’s plan to cancel student loan debt for tens of millions of borrowers will cost $420 billion, according to the Congressional Budget Office (CBO).
Biden’s executive action seeks to erase up to $20,000 in student loan debt for Pell Grant recipients and up to $10,000 in student loan cancellation for non-Pell grant recipients.
Following the release of the CBO estimate, U.S. Senators Elizabeth Warren and Chuck Schumer issued a joint statement saying that the estimate makes clear that Biden’s debt cancellation plan gives middle class Americans “more breathing room.”
Warren and Schumer added they do not agree with all of the CBO’s analysis and stated they believe the policies demonstrate “how government can and should invest” in working Americans.
The CBO’s estimates do not include any effects of Biden’s proposed income-driven repayment plans or other changes in loan terms, so the final price tag may end up being higher.
“CBO’s new estimate confirms the outrageous cost of the White House plan to cancel large amounts of student debt, by executive order, to nearly all borrowers almost regardless of need,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “The debt cancellation and pause alone will cost $420 billion – a bit more than we previously thought – and costs could reach $510 to $610 billion with their IDR changes. The Biden Administration’s failure to release their own cost estimate should have been a red flag.”
As of June 30, 2022, 43 million borrowers held a combined $1.6 trillion in federal student loan debt, CBO officials said. Roughly $430 billion of that would be forgiven, the agency estimates.
The debt-cancellation plan would be limited to individuals who earn less than $125,000 per year, or married couples or heads of households that earn less than $250,000.
“As CBO’s estimates help confirm, the President’s student debt plan would wipe out the ten-year savings from the Inflation Reduction Act twice over, worsen inflationary pressures, and deliver benefits to millions of Americans with advanced degrees in upper-income households,” MacGuineas said.
“This might be the most costly executive action in history,” she added. “It’s unacceptable that the President would implement it without offsets and without Congressional approval. Including these actions, the President has now added nearly $4.9 trillion to ten-year federal deficits through legislation and executive actions.”
