The cancelation of President Joe Biden’s student loan forgiveness plan produced a rare budget surplus in August, the Treasury Department reported Wednesday. According to the Monthly Treasury Statement, the U.S. recorded an $89 billion budget surplus in August 2023 – a marked contrast with the $220 billion deficit recorded in August 2022.
In June the Supreme Court struck down the Biden plan, which would have forgiven up to $20,000 in student loan debts for millions of Americans, at a cost of roughly $400 billion over 10 years. A substantial portion of that cost was added to the budget figures in August 2022; the plan’s cancelation generated a roughly similar credit that was applied to the budget in August 2023, helping to produce a surplus for the month – even though the program was canceled before it took effect.
“This month’s budget outlays include impacts from the $319 billion Debt Relief Reversal downward modification to the Department of Education Federal Direct Student Loans program, resulting in a surplus of $89 billion for August 2023,” the Treasury said. “August typically reflects a budget deficit (68 times out of 69 fiscal years) as there are no major tax due dates.”
Even with the unusual surplus recorded in August, the budget deficit is on track to grow substantially in 2023 on a year-over-year basis. The deficit in the first 11 months of the 2023 fiscal year, which started in October 2022, was $1.52 trillion – a 61% increase from the $946 billion cumulative deficit in August 2022. Leaving aside the distortions created by the accounting for the student loan forgiveness plan, both this year and last, the budget deficit will roughly double in 2023 relative to 2022.
One of the reasons for the growing deficit is the increase in debt-servicing costs. The Treasury spent $630 billion on net interest in the first 11 months of 2023, a 33% increase from the year before.
