The White House cannot say how much President Joe Biden’s student loan debt forgiveness plan will cost taxpayers or how it will be financed.
But new analysis suggests the plan will cost at least $500 billion.
What are the details?
The Committee for a Responsible Federal Budget published analysis on Wednesday showing how Biden’s plan will cost taxpayers at least a half-trillion dollars over the next 10 years.
First, canceling $10,000 of student loan debt per borrower who earns less than $125,000 annually — and $20,000 for recipients of Pell Grants — will cost an estimated $360 billion. The Penn Wharton Budget Model settled on a similar figure.
“It will cancel about $525 billion of student debt. The cost of this cancellation is lower than the amount of debt itself because some of that debt was already projected to be forgiven through other forgiveness programs or not paid back in full,” CRFB explained.
Second, the new income-driven repayment plan, which significantly eases the financial burden of borrowers, in Biden’s action will cost an estimated $120 billion. However, analysts cautioned this figure may not tell the entire story because the White House has not yet said who will be eligible.
Third, extending the payment moratorium another four months will cost taxpayers $20 billion. Fortunately, Biden said it will be the final extension.
Underscoring the potential short-sightedness of the plan, the CRFB analysis found that it will take just five years for outstanding student loan debt to return to its current level of $1.6 trillion.
How will it be financed?
The White House said Thursday it believes the plan “will be fully paid for” but has not said how.
Importantly, Congress has not passed a law allocating money for the plan, thus it remains unclear how the plan will be financed.
Absent of congressional action, Biden is only, in the words of top Obama administration adviser Jason Furman, “[p]ouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”