Nonpartisan Congress office: Biden’s student debt relief will cost US $400B over 10 years
Joe Biden‘s student loan relief plan could cost the country $400 billion over the next decade as the administration prepares to unveil next steps for borrowers to apply for forgiveness as early as next month.
The nonpartisan Congressional Budget Office noted in a letter to the Senate and House Labor committees noting the high cost of the president’s relief plan, as well as reporting the plan would cause outstanding student loans to increase by $20 billion.
In August, Biden announced his plan to cancel $10,000 in federal student loan debt for borrowers making less than $125,000 individually and $250,000 jointly. That forgiveness would rise to $20,000 for those with Pell Grants.
The White House now says that more guidance is coming that will provide more information on how borrowers can apply for their slice of the forgiveness.
Biden’s announcement included extending the repayment moratorium for a fifth and final time past the previous August deadline – and making it so that student loan payments will resume in January 2023 for the first time since the onset of the coronavirus pandemic in March 2020.
White House Press Secretary Karine Jean-Pierre said Monday that the administration will share more information on how to apply for student loan forgiveness ‘very, very soon’
The nonpartisan Congressional Budget Office says Biden’s plan will cost America $400 billion over the next decade and the latest moratorium will increase loan debt by $20 billion
Payments, interest accrual and involuntary collections for federal student loans were put on moratorium throughout the public health emergency.
This final extension of repayments from September 2022 to December 2022 will lead to an increase of $20 billion in outstanding loans, the CBO noted in their letter to Senator Richard Burr and Representative Virginia Foxx, the two Republican ranking members of their respective chamber’s labor panels.
‘CBO estimates that the cost of student loans will increase by about an additional $400 billion in present value as a result of the action,’ the letter adds.
Phillip Swagel, once the Assistant Secretary of the Treasury for Economic Policy under President George W. Bush, is director of CBO and penned the Monday letter.
Burr and Foxx asked the CBO questions regarding Biden’s plan, which will likely be legally challenged by several red states’ Attorneys General once more specifics and criteria are laid out in October.
Biden’s ambitious forgiveness plan is not automatic, and would require that borrowers apply for the relief, the administration revealed when unveiling the plan in August.
‘We’ll have something to share on that very, very soon – on the application process and the next steps,’ White House Press Secretary Karine Jean-Pierre said during her briefing on Monday.
‘Once we have that we’ll share it with all of you,’ she assured when asked about the application process.
The CBO’s projections show that 95 percent of borrowers with outstanding federal student loans would be eligible to apply for forgiveness and that 65 percent of income-eligible borrowers received a Pell Grant, making them eligible for $20,000 in relief.
Biden’s plan forgives $10,000 in federal student loan debt to those making less than $125,000 individually and $250,000 jointly – that relief goes to $20,000 for those who had Pell Grants
Ninety percent of eligible borrowers are expected to apply for debt cancellation, according to the CBO projections.
The action would relieve 45 percent of eligible borrowers of their entire student loan debt to the federal government.
Jean-Pierre noted that the majority of those benefiting from the relief would be those making $75,000 or less.
‘There’s always a lot of noise around the student loan debt relief. And the bottom line is, this is going to give some breathing room to many Americans – tens of millions of Americans,’ the president’s spokesperson noted to reporters on Monday.
‘This is going to be an important step forward in giving people an opportunity to save some money,’ Jean-Pierre said.
Democrats lauded the CBO estimates, claiming it proves Biden’s plan is a win for ‘millions of middle class families’ who they claim now ‘have more breathing room.’
‘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,’ Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren admitted in a joint statement.