The Congressional Budget Office (CBO) has unveiled its initial analysis of President Joe Biden’s student loan debt cancellation action, determining the cost of outstanding student loans to the federal government will increase by about $400 billion due to debt cancellation.
According to the analysis, Biden’s move to cancel $10,000 in student loan debt for millions of borrowers, and up to $20,000 in forgiveness for Pell Grant recipients, will account for the bulk of the increase. The extension of the pause on payments and interest accrual for federally-held student loans until Dec. 31, 2022 would account for $20 billion of the increase.
The analysis was requested by Rep. Virginia Foxx (R-N.C.), ranking member of the House Committee on Education and Labor, and Sen. Richard Burr (R-N.C.), ranking member of the Senate Health, Education, Labor and Pensions (HELP) committee, who have long lambasted the administration’s move to cancel student loan debt.
“CBO’s $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility. It is just the tip of the iceberg,” Foxx said in a statement on Monday. “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.”
Sen. Elizabeth Warren (D-Mass.), a proponent of student loan debt cancellation, said she and Senate Majority Leader Chuck Schumer (D-N.Y.) did not agree with “all of CBO’s assumptions that underlie this analysis,” and reiterated that the bulk of debt cancellation would go to those making less than $75,000 per year.
The pandemic pause on interest accrual and monthly payments on federally-held student loans, along with Biden’s proposed debt cancellation, “are policies that demonstrate how government can and should invest in working people, not the wealthy and billionaire corporations,” Warren said, alluding to the Tax Cuts and Jobs Act passed by Republicans and signed into law by former President Donald Trump in 2017.
CBO also reported that of the 37 million borrowers with Direct Loans from the federal government, 95% meet the administration’s income criteria for eligibility, 65% of income-eligible borrowers have received at least one Pell Grant, 90% of income-eligible borrowers will apply for debt cancellation, and 45% of income-eligible borrowers will have their entire outstanding debt canceled.
The White House recently published its own data with a state-by-state analysis that has some crossover with CBO’s findings.
CBO said it will publish additional estimates as soon as they are completed, including costs associated with proposed income-driven repayment plans, and any other changes in loan terms, or effects on loans issued after June 30, 2022.
Publication Date: 9/27/2022