The White House’s plan to cancel student loan debt for tens of millions of American borrowers will cost roughly $400 billion, according to a new estimate released by the nonpartisan Congressional Scoreboard.
The scoreboard also found that the White House’s plan to temporarily extend an existing pause in student loan payments would cost roughly $20 billion.
The new estimate will add new fuel to the debate over President Biden’s decision on student debt, which was applauded by advocates but immediately attacked by Republican lawmakers as an inefficient and inefficient use of government money. Biden announced in August that his administration would write off up to $20,000 in student debt for low- and middle-class borrowers.
Supporters of student debt cancellation have argued that similar estimates in the past have exaggerated the cost of the policy to the federal government, because despite formally owing money to the federal government, many borrowers never repay the loans.
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The CBO estimate excludes the simultaneous move by the White House to reduce the monthly amount that borrowers can be required to pay as a percentage of their income from 10% to 5%. That policy will cost an additional $120 billion, according to estimates from the Committee for a Responsible Federal Budget, a D.C.-based think tank that has opposed Biden’s policy.
“The president announced possibly the most expensive executive action in history without a score, and now we’re seeing how expensive that policy will be,” said Marc Goldwein, senior vice president for policy at the Committee for a Responsible Federal Budget. , in an interview before the premiere of the score.
More than 40 million Americans could receive some level of student loan relief under Biden’s plan. Half of them could have their debt written off entirely, according to the White House. The administration estimates that 60 percent of borrowers are eligible to reduce their debt by $20,000 because they received Pell Grants, federal aid for low-income students, as undergraduates.
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A recent Census Bureau analysis said black and Hispanic women could benefit the most from the one-time cancellation policy. Both groups have a disproportionate share of educational debt relative to their peers.
White House officials have said the typical black borrower will see their balance cut by nearly half, and more than one in four will have their debt wiped out entirely, even before the $10,000 is applied additional for Pell recipients.
About 8 million borrowers, whose incomes are already registered with the department, will automatically have their loans forgiven without having to apply, according to the Education Department. All others must apply in early October, when the agency plans to release the form.
GOP lawmakers and state attorneys general have said they are exploring the possibility of a lawsuit to overturn the policy before it takes effect. A conservative group, the Job Creators Network, has said it plans to sue the administration once the Education Department guidelines are released.
Calculate how much of your student loan debt can be forgiven
Some economists warned that opponents of the policy often exaggerate its price. Marshall Steinbaum, an economist at the University of Utah, said his research suggests that more than 60 percent of outstanding student loans have increasing balances over time, suggesting that many of them are not being paid.
“A very large portion of the student debt already outstanding was not due anyway, so I’m curious how the CBO will account for the fact that most of the student debt was already uncollectible,” said Steinbaum, who supports the student debt cancellation, to an interview before the release of the CBO.