• Tue. Nov 22nd, 2022

Canceling Biden’s student loan will cost $400 billion, new estimate suggests, as White House pushes back

ByMadeleine J. Pierce

Sep 27, 2022

President Joe Biden’s federal student loan forgiveness plan will cost $400 billion over 10 years, according to a revised estimate this week from the Congressional Budget Office.

It’s a lower figure than a forward outside estimate, but the nonpartisan federal agency’s projection has prompted a rapid pushback from the White House, which is sensitive to criticism that it is increasing rather than cutting the deficit. audience.

In a letter Sent Monday to North Carolina Republicans, Senator Richard Burr and Representative Virginia Foxx following their investigations into Biden’s announcement last month to forgive up to $20,000 in federal student loans, the CBO said noted that the cost of suspending refunds until the end of 2022 will add an additional $20 million on top of that $400 billion price tag.

This CBO estimate does not include the cost of another feature of Biden’s plan: lowering the maximum amount a borrower can repay to 5% of income, down from 10% previously. The nonpartisan Committee for a Responsible Federal Budget estimates that this would amount to $120 million.

The CBO score, which the agency says is “highly uncertain” due to components that include projections dependent on future economic conditions and how future loan terms might change, is slightly lower than Wharton Business School’s. from the University of Pennsylvania. Evaluation that the three components of the rebate plan would cost approximately $605 billion.

A student studies at the Rice University Library, August 29, 2022 in Houston, Texas.

Brandon Bell/Getty Images

Opponents of Biden’s student loan program — including some members of his own party — have insisted the plan is impractical in a time of historic inflation rates and high gas prices, although the plan’s many Democratic supporters say it helps solve the problem of education affordability. problems.

The White House argues that the cost of the student loan forgiveness plan pales in comparison to the president’s ability to promote debt reduction elsewhere.

The estimated price of canceling the loan, however, is more than the $300 million the Biden-backed Inflation Reduction Act is expected to reduce the federal deficit. (An administration official told ABC News that, overall, the cash flow impact of debt cancellation will be very small in 2023 — about $21 billion.)

In a statement, a White House spokesperson pointed out that the president is still likely to reduce the federal deficit this year, despite spending on debt cancellation, and the spokesperson compared that to a significant tax cut under Biden’s predecessor, Donald Trump.

“The Biden-Harris administration’s student debt relief plan provides respite for tens of millions of working families. It gives people struggling with student debt what they want to start a business, buy that first house or just have a little more time to pay the monthly bills,” Abdullah Hasan said. “It’s a stark contrast to Trump’s tax bill, which inflated the deficit by nearly $2 trillion. dollars and provided the vast majority of benefits to large corporations and the wealthiest individuals.”

PHOTO: President Joe Biden delivers remarks at the National Education Association headquarters in Washington, DC, August 23, 2022.

President Joe Biden delivers remarks at the National Education Association headquarters in Washington, DC on August 23, 2022.

Shawn Thew/EPA Via Shutterstock

The White House also circulated a memo pushing back on the CBO’s estimate, noting that it assumed a 90% participation rate in the pardon program – although similar programs on a smaller scale had much higher participation. weak.

The White House memo disputed how the CBO arrived at $400 billion, suggesting that the agency’s own logic pegged the figure at around $250 billion.

The debt cancellation program is expected to open its applications in October.