President Biden’s unilateral decree to ‘forgive’ student loan debt for tens of millions of Americans will cost about $400 billion over a decade, the congressional budget office calculated.
In August, Biden unveiled a program to transfer up to $10,000 in student debt from individuals making less than $125,000 and households making under $250,000 to the American public. It also relieves $20,000 in debt for Pell grant recipients, applying to potentially 60 percent of borrowers.
The enormity of the expense is sure to stoke more outrage among Republicans who call the plan an illegal boondoggle that will chiefly benefit affluent college graduates rather than the financially struggling.
The order is expected to raise the tax burden even for those who didn’t receive a degree, and will exacerbate already sky-high inflation. As early as July 2021, the Education Department, Democrats, including House Speaker Nancy Pelosi, and Republicans, all agreed that the president has no authority to announce student loan forgiveness, with that power being left exclusively in the hands of Congress.
“As of June 30, 2022, 43 million borrowers held $1.6 trillion in federal student loans. About $430 billion of that debt will be canceled,” CBO estimates. Biden’s plan, therefore, would “erase” nearly 27 percent of outstanding student debt.
The CBO score is worse even than the $300 billion cost predicted by the University of Pennsylvania Wharton Budget Model.
The estimate doesn’t account for Biden’s additional action to lower from 10 percent to 5 percent the maximum proportion of discretionary income borrowers must pay toward their student-loan principle. That policy could cost an additional $120 billion, according to the Committee for a Responsible Federal Budget, the Washington Post noted. The Biden rule also would raise the amount of income that is considered non-discretionary income and is shielded from repayment.
“The president announced possibly the most expensive executive action in history without a score, and we’re now seeing just how expensive this policy is going to be,” Marc Goldwein, senior vice president for policy with organization, told the Post.
A number of litigants who may or may not have standing, such as the Job Creators Network, have threatened to sue the Biden Administration after the Education department releases the formal guidance.
After extending the pause on student loan payments several times during the pandemic, the Biden administration also said it is extending it a “final time” through December 31, 2022, with payments resuming in January 2023.