The Congressional Budget Office (CBO) estimates that the Biden administration’s student loan forgiveness plan will cost about $400 billion over the next 10 years.
Phillip Swagel, the director of the CBO, sent a letter on Monday to members of Congress, Sen. Richard Burr (R-NC) and Rep. Virginia Foxx (R-NC), where he outlined “the effects” of President Joe Biden’s student loan forgiveness plan announced in late August.
The administration announced that $20,000 in student loan fees would be forgiven for borrowers who made less than $125,000 annually and received a Pell Grant in their financial aid packages, and all other borrowers under the same income standard would be eligible for $10,000 in forgiveness.
Swagel indicated in the letter that the CBO’s estimates are “highly uncertain.”
The CBO notes its estimates “do not include any effects of the actions affecting income-driven repayment plans, any other changes in loan terms, or effects on loans issued after June 30, 2022,” as Swagel wrote in the letter.
“The most uncertain components are the projections of how much borrowers would repay if the executive action canceling debt had not been undertaken and how much they will repay under that executive action,” Swagel said.
According to the CBO’s estimate, 65% of student loan debtors qualified for the full $20,000 cancellation while 95% qualified for partial forgiveness. The CBO predicted that 90% of those who were qualified would request loan forgiveness, and that 45% of borrowers would have their entire balance erased.
NBC News reported that the White House responded to CBO’s assertions in a memo, saying, “CBO called its own estimate ‘highly uncertain.’ We agree,” adding, “By law, the federal budget computes the complete cost of student loan relief over the lifetime of the loans, and then records that cost in the year the loans are modified.”
The White House memo went on to say, “But that’s not how this program will affect the bottom line in reality. The cost to the government is not the long-term score, but rather, the annual lost receipts.”
Foxx criticized the Biden administration in a statement about CBO’s estimate, claiming the Biden administration had “lost all sense of fiscal responsibility” and that the estimate was “just the tip of the iceberg.”
Read the lawmaker’s statement below:
“CBO’s $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility. It is just the tip of the iceberg. It doesn’t include the cost of this administration’s other efforts to transfer wealth from college graduates to hardworking taxpayers who never set foot on a college campus, such as his re-write and expansion of the Public Service Loan Forgiveness and Income Driven Repayment programs. Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt.”
The CBO told members of Congress in its letter that the cost of the outstanding loans will likely increase by about $20 billion “because an action suspended payments, interest accrual, and involuntary collections from September 2022 to December 2022.”