President Joe Biden’s student loan cancellation plan will cost an estimated $400 billion over 30 years, according to the Congressional Budget Office.
Biden last month announced a plan to forgive $10,000 in federal student loans for borrowers who earn less than $125,000 a year, or have a household income of under $250,000 if filing jointly. Low-income Pell Grant borrowers are eligible for an additional $10,000 cut.
In addition to the costs to forgive that debt, the CBO estimated the cost of Biden’s pause on student loan payments from September through December 2022 will total $20 billion.
Student loan borrowers stage an Aug 25, 2022 rally in front of the White House to celebrate President Joe Biden canceling some federal student debt.
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The CBO is a nonpartisan agency that calculates the costs of federal revenue and spending plans for Congress. Its latest analysis does not include the cost of adjustments to income-driven repayment plans. Biden’s executive order lowered the cap a borrower would have to pay on their student loans to 5% of their income, down from 10%. The Committee for a Responsible Federal Budget, a think tank opposed to Biden’s student loan plan, has estimated the change will cost an additional $120 billion.
The White House says more than 40 million Americans may be affected by the student loan changes, and half of those could see their entire student debt eliminated.
The application to apply for loan forgiveness is scheduled to be available in early October. At Monday’s White House briefing, press secretary Karine Jean-Pierre said the administration would have updates on the application process “very soon.”
Around 8 million borrowers will receive forgiveness automatically, according to the White House, because the Department of Education already has their income information.