A report prepared by the Congressional Budget Office and released Monday estimated that President Joe Biden’s proposal to forgive up to $20,000 in federal student loan debt for low- and moderate-income borrowers could cost as much as $400 billion.
After coming under increasing pressure from progressives to erase a significant portion of his student loan debt, Biden announced the forgiveness offer in August.
In October, the Ministry of Education will release an application for the program. No student debt has been eliminated yet.
In the reportThe Congressional Budget Office (CBO), which provides objective research to Congress, issued a warning that the numbers are “highly questionable.”
The projection is based on several assumptions, including the number of eligible borrowers who will apply for the program, as well as the share of outstanding federal student loan debt that may not have been repaid over the life of the loans anyway as a result of other existing forgiveness programs, for example. According to CBO, these forecasts are partially dependent on the future conditions of the economy.
In the coming weeks, the White House is likely to release its analysis of the cost of Vice President Biden’s proposal to cancel student loans. The administration has said in the past that the plan would reduce cash flow by roughly $24 billion in the first year.
Individual borrowers who had an annual income of less than $125,000 in 2020 or 2021 would have up to $10,000 of their federal student loan debt forgiven under Biden’s plan, while married couples or heads of households who had an annual income of less than $250,000, will have up to $20,000 of their federal student loan debt forgiven.
If a borrower who qualifies for the program also received a federal Pell Award while enrolled in college, then the borrower may be eligible to have up to $20,000 of their student loan debt forgiven. Each year, millions of students with modest incomes are eligible to receive financial aid in the form of Pell Grants. Eligibility is determined by several factors, including the size and income of the student’s family, as well as the cost of the student’s chosen college. These borrowers also have a higher risk of having trouble repaying their student loans and eventually defaulting.
Since he took office, influential Democrats in Congress, such as Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren of Massachusetts, have pressured Vice President Joe Biden to forgive up to fifty thousand dollars in federal student loan debt for each borrower. Although the plan proposed by the president would write off less of the nation’s debt than Democrats had asked for, they praised the initiative.
In a joint statement released Monday, Schumer and Warren called Biden’s planned impeachment action “transformative” for the middle class.
“Today’s CBO estimate shows that millions of middle-class Americans have more breathing room thanks to President Biden’s historic decision to cancel student debt,” they said. “CBO projection shows millions of middle-class Americans have more breathing room.”
Republicans, however, criticized Vice President Biden’s idea to cancel student loans as a handout that unfairly shifts income from working-class people to those who attended college.
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The Congressional Budget Office says so President Joe Biden’s plan to cancel student loans it will cost about $400 billion over 30 years. Last month, Biden announced a plan to cancel up to $10,000 in federal student loans for people who earn less than $125,000 a year. The CBO is a bipartisan agency that helps Congress figure out how much federal spending and revenue plans will cost.
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