Biden’s Student Loan Plan Might Cost $400 Billion, Says CBO

The Congressional Budget Office released a report on Monday estimating that President Joe Biden’s plan to forgive up to $20,000 in federal student loan debt for low- and middle-income borrowers may cost $400 billion.

In the face of increasing pressure from leftists, Biden launched the forgiveness scheme in August.

Biden's Student Loan Plan Might Cost $400 Billion, Says Cbo
Biden’s Student Loan Plan Might Cost $400 Billion, Says Cbo

In October, the Department of Education will make available a program application. As of yet, no student loans have been forgiven.

The CBO, which provides objective research to Congress, cautioned that the numbers are “very unclear” in their report.

The estimate is based on a number of assumptions, including the number of qualified students who will apply and the percentage of outstanding federal student loan debt that may not be repaid over the loans’ lifetimes due to factors like other forgiveness programs. According to the CBO, the accuracy of these forecasts is tied in part to the direction of the economy in the years to come.

In the coming weeks, the White House is scheduled to produce its own cost assessment of Vice President Biden’s plan to cancel student loans. The strategy has been predicted to cause an annual decrease in cash flow of around $24 billion by the administration.

Biden proposes to cancel up to $10,000 in federal student loan debt for borrowers with yearly incomes of less than $125,000 in 2020 and 2021, and up to $200,000 for married couples and single parents.

Students who qualify for federal Pell grants can get up to $20,000 in forgiven debt. Millions of low-income students receive Pell awards each year based on characteristics such as their family size, income, and the cost of attendance at their chosen institution. In addition, these debtors are more likely to have difficulty making their monthly payments and eventually go into default.

Since taking office, Biden has been under pressure from prominent Democrats like Senate Majority Leader Chuck Schumer and Senator from Massachusetts Elizabeth Warren to forgive up to $50,000 in federal student loan debt for each borrower. Democrats have hailed the action, despite the fact that the President’s plan will eliminate less debt than they requested.

Schumer and Warren released a joint statement on Monday in which they hailed Biden’s planned canceling action as “transformative” for the middle class.

They claimed things like, “President Biden’s historic decision to eliminate student debt has given millions of middle class Americans a much-needed breather,” and that the CBO assessment released today proves it.

Republican critics have called Biden’s idea to cancel student loans an unjust handout to the middle class and the educated.

Rep. Virginia Foxx (R-NC), the Republican chairman on the House Education and Labor Committee, said in a statement on Monday that the Congressional Budget Office’s (CBO) projection of $400 billion demonstrates “this administration has lost all sense of fiscal responsibility.”

Conservative organizations and Republican attorneys general are formulating a legal strategy to stop the plan from going into force.

Biden’s idea to streamline the income-driven repayment plan, an effort to cut future student loan borrowers’ monthly payments, was not factored into the CBO projection and might increase the total cost to the government.

As Bloomberg News reported on Monday, Maya MacGuineas, president of the independent group Committee for a Responsible Federal Budget, has also attacked Biden’s student debt measure, saying it “would wipe out the ten-year savings from the Inflation Reduction Act twice over.”

In August, Congress enacted the Inflation Reduction Act, a major piece of healthcare and climate legislation that Biden strongly supported.

Student debt relief under the Biden-Harris administration will give tens of millions of working families some much-needed breathing room, according to White House spokesman Abdullah Hasan.

That’s in “stark contrast” to “the Trump tax bill, which expanded the budget by nearly $2 trillion and handed the vast majority of rewards to big corporations and the wealthiest individuals,” he said.

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