The new estimate will spark debate over President Biden’s student loan decision, which was welcomed by proponents but immediately attacked by Republican lawmakers as a wasteful and inefficient waste of government spending. Biden announced in August that his administration would cancel up to $20,000 in student debt for lower- and middle-class borrowers.
Proponents of student debt forgiveness have argued that similar estimates in the past have overestimated the cost of the policy to the federal government because despite formally owing the federal government money, many borrowers never repay the loans.
The CBO estimate rules out the White House’s concurrent move to lower the monthly amount borrowers could be forced to repay as a percentage of their income from 10 percent to 5 percent. Those policies are expected to cost an additional $120 billion, according to estimates by the Committee for a Responsible Federal Budget, a DC-based think tank that opposes Biden’s policies.
“The president announced possibly the most expensive executive action in history without a score, and we now see how expensive this policy is going to get,” Marc Goldwein, senior vice president for policy at the Committee on a Responsible Federal Budget, said in a statement. interview before the release of the score.
More than 40 million Americans could receive some degree of student funding under Biden’s plan. Half of those could be forgiven in full, according to the White House. The administration estimates that 60 percent of borrowers are entitled to a $20,000 debt reduction because they received Pell Grants, federal aid for lower-income students, as college students.
Who Qualifies for Biden’s Student Loan Forgiveness Plan?
A recent analysis by the Census Bureau said black and Hispanic women could benefit most from the one-time cancellation policy. Both groups have a disproportionate share of education debt relative to their peers.
White House officials have said the typical black borrower will nearly halve their balance, and more than one in four will have their debt forgiven entirely, even before the additional $10,000 for Pell recipients is applied.
About 8 million borrowers, whose income is already registered with the department, will have their loans waived automatically without having to apply, the Ministry of Education said. Everyone else will have to sign up in early October, when the agency expects to release the form.
GOP lawmakers and attorneys general have said they are exploring the possibility of a lawsuit to overturn the policy before it goes into effect. A conservative group, the Job Creators Network, has said it plans to sue the administration once the Ministry of Education guidelines are released.
Calculate how much of your student debt can be forgiven
Some economists warned that opponents of the policy often exaggerate the price tag. Marshall Steinbaum, an economist at the University of Utah, said his research suggests that more than 60 percent of outstanding student loans have rising balances over time — suggesting that many of them aren’t paying off.
“A very large part of the student debt that was already outstanding would not be repaid anyway, so I am curious how the CBO will declare that most student debts were already uncollectible,” says Steinbaum, an advocate of student debt cancellation. an interview before the release of the CBO.
Danielle Douglas–Gabriel contributed to this article.