The nonpartisan Congressional Budget Office estimated Monday that President Biden’s attempt to forgive between $10,000 and $20,000 in student loan debt for millions of borrowers would cost taxpayers $400 billion — while another estimate indicated the total cost could climb above $600 billion.
Biden last month said he would use emergency powers triggered by the COVID-19 pandemic to set aside $10,000 in federally owned student debt per borrower making under $125,000 per year — or $20,000 per Pell Grant recipient with the same income.
The CBO estimate will provide new impetus to legislators and some state officials who are exploring options to block the initiative on constitutional grounds.
The budget office said in a memo that it “estimates that the cost of student loans [to the government] will increase by about an additional $400 billion in present value as a result of the action canceling up to $10,000 of debt issued on or before June 30, 2022, for borrowers with income below specified limits and an additional $10,000 for such borrowers who also received at least one Pell grant.”
In addition to the loan forgiveness, the CBO estimated Biden’s August decision to again defer payments and interest accrual on student loans through December would cost taxpayers another $20 billion.
“This isn’t constitutional. A President can’t just give away $400 billion,” tweeted Rep. Thomas Massie (R-Ky.) in response.
“Joe Biden isn’t ‘cancelling’ student loan debt. He’s just forcing us to pay for it,” wrote Abigail Marone, a spokeswoman for Sen. Josh Hawley (R-Mo.).
The Committee for a Responsible Federal Budget noted Monday that the CBO estimate did not take into account another part of Biden’s plan that caps the amount borrowers must pay monthly on undergraduate loans at 5% of their earnings, down from the current 10%. The organization estimated last month that the so-called “income driven repayment” (IDR) policy would cost taxpayers another $120 billion.
On Monday, the CRFB estimated the cost of IDR at between $90 billion and $190 billion — driving the true cost to the US over $500 billion on the low end and more than $600 billion on the high end.
CRFB President Maya MacGuineas said in a statement that Biden’s student debt plan “would wipe out the ten-year savings from the Inflation Reduction Act twice over, worsen inflationary pressures, and deliver benefits to millions of Americans with advanced degrees in upper-income households”
“This might be the most costly executive action in history,” MacGuineas added. “It’s unacceptable that the President would implement it without offsets and without Congressional approval.”
Biden invoked emergency powers to authorize the loan forgiveness following a pressure campaign from the Democratic Party’s left wing. The Education Department’s legal department cited a 2003 law that allows the president to “alleviate hardship” for student loan recipients during a national emergency.
Former President Donald Trump previously allowed borrowers to defer student loan payments because of the pandemic.
However, Biden appeared to undercut his own justification for the handout earlier this month, when he said in a “60 Minutes” interview that “the pandemic is over” — before any loans actually are forgiven.