The Biden administration’s sweeping effort to provide widespread student loan forgiveness for some Americans will cost about $400 billion, according to new reporting by Congress’s nonpartisan budget scorekeeper.
The Congressional Budget Office (CBO) said 43 million borrowers shared $1.6 trillion in federal student loan debt as of June 30. Under Biden’s plan, about $430 billion of that debt will be wiped out, the reporting shows.
The CBO also estimated the costs for the Biden administration’s recent renewal of the moratorium on federal student loan payments and interest accrual, which had been set to lapse at the end of August.
The extension, which punts the deadline to the end of the year, was projected to cost $20 billion in the new report.
According to the CBO’s analysis, of the nearly 37 million borrowers who have direct loans from the federal government, 95 percent meet the income eligibility requirements under the new forgiveness plan. Almost half of those borrowers will see all their outstanding debt canceled, the CBO said.
The CBO also projected that nearly 65 percent of borrowers who meet the income eligibility requirements have also received at least one Pell Grant and that “90 percent of income-eligible borrowers will apply for debt cancellation.
The reporting comes as fiscal hawks and Republicans have criticized the recent move by the Biden administration as too expensive.
In a statement reacting to the report on Monday afternoon, Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the price tag “outrageous,” saying that “this might be the most costly executive action in history.”
At the same time, advocates and progressives have pushed the Biden administration to go further, touting widespread debt forgiveness as a way to help lower-income households struggling with repayment and borrowers of color who face an outsize burden in the student loan system.
Senate Majority Leader Charles Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.), who pushed Biden to go as far as forgiving $50,000 in federal student debt per borrower, said in a statement on Monday that the recent estimate “makes clear that millions of middle class Americans have more breathing room thanks to President Biden’s historic decision to cancel student debt.”
While they also said they don’t agree with some of the CBO’s assumptions underlying the analysis, they added, “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.”
“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,” they added.