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The Congressional Budget Office, Congress’s nonpartisan research arm, estimates that President Biden’s plan to forgive some federal student loans and suspend payments through the end of the year will cost the government about $420 billion.
The CBO released its estimate, which it described as “highly uncertain” because of unpredictability around borrower behavior, in a letter to congressional leaders Monday. It said forgiving repayments would cost the government $400 billion over a 30-year period, while the payment suspension would add another $20 billion.
Biden said in late August that he would cancel up to $10,000 in loans for Americans earning less than $125,000 annually. Pell Grant recipients would get an additional $10,000 in debt relief under the plan.
The CBO estimate is the first that the agency has released since Biden’s announcement. The office is still analyzing the plan and will release additional estimates as they are ready, the letter said.
The federal student loan balance was $1.6 trillion as of the end of June and was spread among 43 million borrowers, according to the CBO. The agency estimates that $430 billion will be canceled under the Biden plan. The cost estimate is based on the loan balances of borrowers who qualify for relief and the proportion expected to apply for forgiveness.
Congressional and state Republicans who have criticized the plan as a taxpayer-funded handout reiterated those complaints Monday after the estimate was released.
“Now the CBO has confirmed what we’ve known for months. The President’s student loan debt scheme will cost taxpayers a staggering $400 billion—a cost that will be borne by working Americans who chose not to go to college or who responsibly paid off their loans,” Senator Richard Burr, a North Carolina Republican and the ranking member on the Senate education committee, said in a statement. “Every American should be outraged by the President’s cynical ploy and by the real cost it places on those who stand to benefit the least.”
