The new estimates will add fresh momentum to the debate over President Biden’s student debt decision, which was cheered by supporters but immediately slammed by Republican lawmakers as a waste of government funding and inefficiency use. Biden announced in August that his administration would cancel up to $20,000 in student debt for lower- and middle-class borrowers.
Proponents of student debt cancellation argue that similar estimates in the past have overstated the policy’s cost to the federal government, as many borrowers never repay their loans despite officially owing the federal government.
White House says student loan forgiveness applications to roll out in October
The CBO estimate does not include a simultaneous White House move to reduce the amount borrowers are forced to repay each month as a percentage of their income from 10% to 5%. The policy would cost an additional $120 billion, according to estimates from the Committee for a Responsible Federal Budget, a Washington think tank opposed to Biden’s policies.
Marc Goldwein, senior vice president for policy at the Responsible Federal Budget Council, said: “The president announced what may have been the most expensive executive action in history, but without scoring, we are now seeing the cost of this policy. How big.” , in an interview before the score was released.
Under Biden’s plan, more than 40 million Americans could receive some degree of student loan forgiveness. According to the White House, half of that debt could be cancelled entirely. The government estimates that 60% of borrowers are entitled to $20,000 in debt reduction because they received federal aid Pell Grants for low-income students as an undergraduate.
Who Qualifies for Biden’s Student Loan Forgiveness Program?
Black and Hispanic women are likely to benefit the most from the one-time cancellation policy, according to a recent Census Bureau analysis. Both groups hold a disproportionate share of educational debt compared to their peers.
White House officials said the balance of the typical black borrower would be cut by nearly half, and more than a quarter would have their debt completely wiped out, even before applying for an additional $10,000 for Pell recipients.
According to the Ministry of Education, about 8 million borrowers whose incomes are already on file with the department will have their loans automatically forgiven without the need to apply. Everyone else must apply in early October, when the agency is expected to release the form.
Republican lawmakers and state attorneys general said they were exploring the possibility of overturning the policy through litigation before it took effect. A conservative group, the Job Creators Network, said it planned to sue the government once the Department of Education guidance was released.
Calculate how much student loan debt can be forgiven
Some economists have warned that opponents of the policy often exaggerate its price tag. University of Utah economist Marshall Steinbaum said his research has shown that over 60 percent of outstanding student loan balances have increased over time — a sign that many of them are not being paid back.
Interview with Steinbaum, who supports student debt cancellation, before the CBO release.