CBO: Biden’s student debt plan would cost $400 billion

Sep 26, 2022, 2:28 PM | Updated: 2:47 pm
FILE - President Joe Biden speaks about student loan debt forgiveness in the Roosevelt Room of the ...

FILE - President Joe Biden speaks about student loan debt forgiveness in the Roosevelt Room of the White House, Aug. 24, 2022, in Washington. The Congressional Budget Office estimates that President Joe Biden’s plan for student debt cancellation will cost about $400 billion over the next 30 years. The estimates were issued Monday in response to a request from Republican lawmakers who oppose Biden’s plan because of its cost. (AP Photo/Evan Vucci, File)

(AP Photo/Evan Vucci, File)

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

The figures were released Monday in response to a request from Republican lawmakers who oppose Biden’s plan in large part because of its costs. They were quick to cite the estimates as evidence that the plan will “bury” taxpayers, passing along the costs to huge numbers of Americans who never went to college.

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

On Monday, the White House noted that the CBO’s estimated cost in the first year — $21 billion — is actually lower than the administration’s early estimate of $24 billion.

To reach the CBO’s $400 billion figure, officials looked at the immediate cost of cancellation along with the longer-term impact, including lower monthly repayments that would have been higher if not for the cancellation.

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. Biden in August continued the pause through the end of the year, calling that the final extension.

Biden has played down the cost of the cancellation plan, saying it would be offset by other measures to reduce the federal deficit, including his landmark Inflation Reduction Act. On Monday, the White House defended the plan, saying it will provide relief to struggling borrowers, allowing them to start businesses, buy homes or just pay their bills.

“It’s a stark contrast to the Trump tax bill, which ballooned the deficit by nearly $2 trillion and provided the vast majority of benefits to big corporations and the wealthiest individuals,” White House spokesman Abdullah Hasan said.

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

Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., who supported debt cancellation, said they don’t agree with some of the assumptions underpinning the CBO estimates. But a joint statement from the senators said the estimates show that “millions of middle class Americans have more breathing room” thanks to Biden’s plan.

Republicans didn’t see it that way.

“Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt,” said Rep. Virginia Foxx, the top Republican on the House education committee.

Biden’s plan promises to cancel $10,000 in federal student debt for borrowers with incomes of less than $125,000 per year or households making less than $250,000. Those who received federal Pell Grants to attend college would get an additional $10,000 erased.

An application to receive the benefit is expected by early October. The fate of the plan largely depends on whether it can survive legal challenges that conservatives have promised to bring.

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

The office warned 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 probably would have gotten their debt canceled anyway using payment plans that promise to cancel remaining debt after 10 or 20 years.

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

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

It would limit borrowers’ payments to 5% of their discretionary income, down from 10% now, and it would forgive any remaining balance after 10 years, down from 20 years now.

___

The Associated Press education team receives support from the Carnegie Corporation of New York. The AP is solely responsible for all content.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Former U.N. Ambassador and former South Carolina Gov. Nikki Haley speaks during an event sponsored ...
Associated Press

Haley signals 2024 openness despite pledge to back Trump

CLEMSON, S.C. (AP) — Nikki Haley, U.N. ambassador under President Donald Trump, said Tuesday that she would take the Christmas holiday to mull a possible 2024 presidential bid, contradicting her statement last year that she wouldn’t enter the race if Trump opted to run again. “We are taking the holidays to kind of look at […]
22 hours ago
Former Australian Prime Minister Scott Morrison, standing at rear, speaks during a censure motion a...
Associated Press

Australian Parliament censures former prime minister

CANBERRA, Australia (AP) — Australia’s former Prime Minister Scott Morrison on Wednesday listed his achievements in government including standing up to a “bullying” China as he unsuccessfully argued against being censured by the Parliament for secretly amassing multiple ministerial powers. The center-left Labor Party government introduced to the House of Representatives a rare censure motion […]
22 hours ago
FILE - Stewart Rhodes, founder of the citizen militia group known as the Oath Keepers speaks during...
Associated Press

Oath Keepers’ Rhodes guilty of Jan. 6 seditious conspiracy

WASHINGTON (AP) — Oath Keepers founder Stewart Rhodes was convicted Tuesday of seditious conspiracy for a violent plot to overturn President Joe Biden’s election, handing the Justice Department a major victory in its massive prosecution of the Jan. 6, 2021, insurrection. A Washington, D.C., jury found Rhodes guilty of sedition after three days of deliberations […]
22 hours ago
Associated Press

UN envoy: Military escalation in Syria is `dangerous’

UNITED NATIONS (AP) — The U.N. special envoy for Syria warned Tuesday that the current military escalation in Syria is dangerous for civilians and regional stability, and he urged Turkey and Kurdish-led forces in the north to de-escalate immediately and restore the relative calm that has prevailed for the last three years. Geir Pedersen told […]
22 hours ago
FILE - President of Colombia Gustavo Petro arrives for a diner at the Elysee Palace to close the Pe...
Associated Press

Colombia asks for legal status for its people already in US

BOGOTA, Colombia (AP) — Colombia wants the Biden administration to grant temporary legal status to its citizens now living in the United States, noting its own efforts to address regional migration by hosting 2 million Venezuelans who fled their homes. Gustavo Petro, who was elected Colombia’s first leftist president in June, is committed to the […]
22 hours ago
A sign at Twitter headquarters is shown in San Francisco, Friday, Nov. 18, 2022. (AP Photo/Jeff Chi...
Associated Press

Twitter ends enforcement of COVID misinformation policy

Twitter will no longer enforce its policy against COVID-19 misinformation, raising concerns among public health experts and social media researchers that the change could have serious consequences if it discourages vaccination and other efforts to combat the still-spreading virus. Eagle-eyed users spotted the change Monday night, noting that a one-sentence update had been made to […]
22 hours ago

Sponsored Articles

...
Quantum Fiber

How high-speed fiber internet edges out cable for everyday use

In a world where technology drives so much of our daily lives, a lack of high-speed internet can be a major issue.
...
Quantum Fiber

How high-speed fiber internet can improve everyday life

Quantum Fiber supplies unlimited data with speeds up to 940 mbps, enough to share 4K videos with coworkers 20 times faster than a cable.
...
Children’s Cancer Network

Children’s Cancer Network celebrates cancer-fighting superheroes, raises funds during September’s Childhood Cancer Awareness Month

Jace Hyduchak was like most other kids in his kindergarten class: He loved to play basketball, dress up like his favorite superheroes and jump as high as his pint-sized body would take him on his backyard trampoline.
CBO: Biden’s student debt plan would cost $400 billion