The Biden Administration’s student loan debt cancellation plan will cost the government $400 billion, according to a report released yesterday by the nonpartisan Congressional Budget Office.
The plan — under which individuals earning less than $125,000 annually will have $10,000 of their student loan debts forgiven, unless they received Pell Grants, in which case they will have $20,000 of their debt forgiven — will wipe out about 25% of the $1.6 trillion in unpaid student loans, according to the report. The decision to extend the moratorium on student loan payments until December 31 will cost an additional $20 billion, according to the report, a copy of which can be accessed by clicking here.
About 37 million individuals have direct loans from the federal government, and 95% of those meet the income criteria to be eligible to have their student loan debts forgiven, according to the report. About 45% of income-eligible borrowers will have all of their outstanding student loan debt forgiven under the plan.
The CBO did say in its report that its predictions are “highly uncertain” because it is impossible to know how much of that debt would have been paid back if the cancellation plan were never put into action. Given the default rates on student loans, there is definitely some percentage of that debt that would never have been repaid.
As can be expected, both Democrats and Republicans rushed to issue statements reaffirming their positions on the plan.
“Today’s CBO estimate makes clear that millions of middle class Americans have more breathing room thanks to President Biden’s historic decision to cancel student debt,” said Sen. Elizabeth Warren [D-Mass.] and Sen. Chuck Schumer [D-N.Y.], in a statement. “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. 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.”
Meanwhile, said Rep. Virginia Foxx [R-N.C.], the ranking member of the House Education and Labor Committees, “CBO’s $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility.”