According to the Congressional Budget Office (CBO), President Joe Biden’s plan to cancel up to $20,000 in student loan debt for federal aid borrowers is expected to cost approximately $400 billion over the next 30 years. This cost will be added to the country’s deficit.
However, according to researchers at the Wharton School of Business, the cost of the loan relief program could reach as high as $1 trillion over a period of 10 years.
According to a report from the National Taxpayers Union, a fiscally conservative advocacy group, the average cost for U.S. taxpayers to cancel federal student debt will be $2,503.22 per person.
The program is designed to provide benefits to borrowers who have already completed their education and are making less than $75,000 per year. But the CBO score did not take into account a significant component of the program, which is a plan to reduce payments for future borrowers who go on to earn low incomes after college. This plan could potentially add hundreds of billions of dollars to the overall cost, according to analysts outside of the government.
The agency also reported that the pause on federal student loan repayments from September to December 2022 would cost an additional $20 billion.
The CBO has estimated that as of June 30, there is a total of $1.6 trillion in federal student loan debt among 43 million borrowers. However, the office has stated that these estimates are uncertain due to the difficulty in predicting how much debt will be repaid after President Biden’s student loan forgiveness plan takes effect. The estimates also do not include loans issued after June 30.
Biden’s plan, which was announced in August, aims to forgive up to $20,000 in debt for Pell Grant recipients and up to $10,000 for other qualified borrowers who meet the income cap.
The CBO estimates that approximately 95% of borrowers meet the criteria for forgiveness and about 45% of borrowers will have their balances completely eliminated.
The Justice Department has denied the lawsuits filed by six Republican-led states who attempted to oppose the new student loan forgiveness program, stating that they do not have grounds to challenge the decision in court. In response, the President argues that he has the right to implement the Student Loan Cancellation program without Congressional approval, citing his executive authority. It is uncertain how the legal process will unfold, but it is likely that the issue will be addressed in the coming months and potentially brought before the Supreme Court.