The estimate by Congress’ nonpartisan scorekeeper is even higher than Republicans opposed to federal student debt cancellation projected.
- The Congressional Budget Office (CBO) on Monday said that Biden’s plan will cost the government $400 billion over the next 10 years.
- The latest extension of the loan payment pause will cost the government another $20 billion.
- The CBO estimates that 90% of eligible borrowers will apply for debt forgiveness.
President Joe Biden’s plan to cancel federal student loan debt for millions of Americans will likely cost more than $400 billion, according to a new estimate by the Congressional Budget Office.
The nonpartisan (CBO) on Monday told Republican lawmakers that it projects Biden’s plan will cost the government $400 billion over the next 10 years. The extension of the student loan payment pause another four months to the end of December 2022 will cost an additional $20 billion.
Biden announced on Aug. 24 that he intends to cancel up to $10,000 in federal student loan debt per borrower making less than $125,000 per year. Borrowers who received a Pell Grant during college may have up to $20,000 forgiven.
The CBO’s cost estimate is greater than Republican opponents to the plan originally thought, ensuring that student debt cancellation will be an issue in November’s midterm elections and beyond.
Rep. Virginia Foxx, the Republican leader of the U.S. House Education and Labor Committee, previously put out a statement pegging the cost of cancellation at more than $330 billion. She was one of two Republican leaders, joined by Sen. Richard Burr, who asked the CBO to provide the estimate.
“CBO’s $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility,” Foxx said in a statement. “Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt.”
Democratic Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren said in a joint statement that they don’t agree with all the assumptions CBO made for its estimate.
“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,” the senators said.
The CBO’s projections make the following assumptions to land on the $400 billion estimate:
- 95% of borrowers meet the income requirement
- 65% of those that are eligible have received at least one Pell Grant
- 90% will apply for debt cancellation
- 45% will have their debt erased entirely
While the cancellation will cost the government an estimated $400 billion, CBO said it expects approximately $430 billion in debt to be erased. However, the CBO projects that a portion of that debt would have likely been forgiven for borrowers on income-driven repayment (IDR) plans.
The CBO’s estimate also considers that those whose debts are only partially forgiven will pay less in interest payments on their remaining debts.
Biden addressed cost concerns during the August press conference at which he announced his debt-cancellation plan, telling reporters that the administration had already paid the cost of debt cancellation through previous actions cutting the federal deficit.
“There is plenty of cumulative deficit reduction to pay for the programs many times over,” he said back in August. “I will never apologize for helping working Americans in the middle class.”