President Joe Biden’s plan to forgive up to $20,000 in student loan debt for millions of borrowers would cost an estimated $400 billion over 30 years, the Congressional Budget Office said Monday, with the majority of the cost coming in the first few years.
The White House plan to suspend loan payments for the rest of 2022 adds another $20 billion to the plan’s cost, CBO said.
The CBO analysis does not include the cost of reducing the minimum amount borrowers are expected to pay on their loans from 10% of disposable income to 5%. According to an analysis by the Committee for a Responsible Federal Budget, which opposes the Biden plan, that provision could cost an additional $120 billion.
“The president announced possibly the most expensive executive action in history without a score, and we’re now seeing just how expensive this policy is going to be,” Marc Goldwein of CRFB told The Washington Post.
Still, the CBO said its “estimates are highly uncertain,” due to the inability to know how much debt would have been repaid in the absence of the program, and how much will be paid under the new rules.
“A very large share of already outstanding student debt was not going to be repaid anyway,” economist Marshall Steinbaum told The Washington Post. “So I’m curious how the CBO will account for the fact that most student debt was already uncollectable.”
Democrats defended the White House plan, and questioned the CBO’s numbers. “In contrast to President Trump and Republicans who gave giant corporations $2 trillion in tax breaks, President Biden delivered transformative middle class relief by cancelling student debt for working people who need it most — nearly 90% of relief dollars will go to those earning less than $75,000 a year,” Sens. Elizabeth Warren (MA) and Chuck Schumer (NY) said in a joint statement. “We don’t agree with all of CBO’s assumptions that underlie this analysis, but it is clear the pandemic payment pause and student debt cancellation are policies that demonstrate how government can and should invest in working people, not the wealthy and billionaire corporations.”
Overall, the CBO expects about a quarter of existing student loan debt to be forgiven under the Bid plan, affecting roughly 40 million people. “As of June 30, 2022, 43 million borrowers held $1.6 trillion in federal student loans," CBO's Phillip L. Swagel wrote to Sens. Richard Burr (R-NC) and Rep. Virginia Foxx (R-NC), who requested the analysis. "About $430 billion of that debt will be canceled.”