Biden’s Student Debt Relief Will Cost $400 Billion Over 30 Years

WASHINGTON – President Joe Biden’s plan for student debt cancellation According to new estimates from the Congressional Budget Office, it will cost the federal government about $400 billion over the next 30 years.

The numbers were released Monday in response to a request from Republican lawmakers who oppose Biden’s plan largely because of its cost. They were quick to cite these estimates as evidence that the plan would “bury” taxpayers by passing the cost on to large numbers of Americans who never attended college.

The Biden administration previously estimated the plan would cost about $24 billion a year over the next 10 years — about $240 billion a decade — while other estimates put the total cost at $500 billion or more over a decade.

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The White House noted Monday that CBO’s first-year cost estimate of $21 billion is actually lower than the administration’s early estimate of $24 billion.

To arrive at the CBO figure of $400 billion, officials considered the immediate cost of the repeal along with longer-term effects, including lower monthly payments that would have been higher if not for the repeal.

The office separately estimated that Biden’s latest extension of a student loan pause will cost an additional $20 billion. Monthly payments on federal student loans have been frozen since the first weeks of the pandemic. In August, Biden extended the hiatus to the end of the year, calling it the final extension.

Biden played down the cost of the repeal plan, saying it would be offset by other measures to reduce the federal deficit, including his landmark Law on reducing inflation. On Monday, the White House defended the plan, saying it would provide relief to struggling borrowers, allowing them to start businesses, buy homes or simply pay bills.

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“This is in stark contrast to Trump’s tax bill, which increased the deficit by nearly $2 trillion and provided the vast majority of benefits to large corporations and the wealthiest individuals,” White House spokesman Abdullah Hassan said.

The administration is expected to release its own detailed cost estimate in the coming weeks.

Senate Majority Leader Chuck Schumer, R-N.Y., and Sen. Elizabeth Warren, D-Massachusetts, who supported debt cancellation, said they disagreed with some of the assumptions behind the CBO estimates. But the senators said in a joint statement that estimates show “millions of middle-class Americans have more breathing room” thanks to Biden’s plan.

Republicans didn’t see it that way.

“Instead of working with Congress to lower the cost of college education, President Biden chose to bury the American people under our unsustainable debt,” said Representative Virginia Foxx, the top Republican on the House Education Committee.

Biden’s plan promises to cancel $10,000 in federal student debt for borrowers making less than $125,000 a year or families making less than $250,000. Those who received federal Pell grants for college will have an additional $10,000 removed.

The application for assistance is expected until the beginning of October. The plan’s fate depends largely on whether it can survive the legal challenges that conservatives have promised to bring.

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The Congressional Budget Office estimates that of the 37 million Americans who have federal student loans, about 95% meet the $10,000 income limit for aid. About 65% also received a Pell grant, making them eligible for a $20,000 waiver.

The office cautioned that its estimates are “highly uncertain” because it’s hard to know exactly how much borrowers would have paid in the future without Biden’s action. Some borrowers would probably pay off their debt anyway using payment plans that promise to pay off the remaining debt in 10 or 20 years.

The estimates are based on everything currently known about Biden’s plan, but some details have yet to be revealed. The office said it may revise its estimates as details emerge.

The $400 billion total notably does not include a separate loan repayment plan that Biden has proposed to help lower-income borrowers in the future. The new plan will be similar to existing plans that cap monthly bills based on the borrower’s income, but with more generous terms.

It would limit borrowers’ repayments to 5% of their discretionary income, up from 10% currently, and would also forgive any balance after 10 years, up from 20 years now.