(WASHINGTON) — President Joe Biden’s federal student loan forgiveness plan will cost $400 billion over 10 years, according to a revised estimate this week from the Congressional Budget Office.
That’s a lower number than from one leading outside estimate, but the nonpartisan federal agency’s projection drew quick pushback from the White House, which is sensitive to criticism it is growing rather than reducing the government deficit.
In a letter sent Monday to North Carolina Republicans Sen. Richard Burr and Rep. Virginia Foxx following their inquiries into Biden’s announcement last month to forgive up to $20,000 in federal student loans, the CBO noted that the cost of pausing repayments through the end of 2022 will add an additional $20 million onto that $400 billion price tag.
That CBO estimate does not include the cost of another feature of Biden’s plan: lowering the maximum amount a borrower can pay back to 5% of their income, down from 10%. The nonpartisan Committee for Responsible Federal Budget estimates that would tack on $120 million.
The CBO score, which the agency estimates is “highly uncertain” due to components that include projections dependent on future economic conditions and on how future terms of loans might be modified, is slightly less than the University of Pennsylvania’s Wharton Business School assessment that all three components of the forgiveness plan would cost about $605 billion.
Opponents of Biden’s student loan program — including some members of his own party — have insisted that the plan is impractical during a time of historic inflation rates and high gas prices, though the many Democratic supporters of the plan say it helps addresses education’s affordability issues.
The White House maintains that the cost of the student loan forgiveness plan pales in comparison to the president’s ability to foster debt reduction elsewhere.
The estimated loan cancellation price comes in higher than the $300 million amount that the Biden-backed Inflation Reduction Act is expected to reduce the federal deficit by, however. (An administration official noted to ABC News that, overall, the cash flow impact of debt cancellation will be very small in 2023 — about $21 billion.)
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In a statement, a White House spokesman emphasized that the president is still likely to reduce the federal deficit this year, despite the outlay for debt forgiveness, and the spokesman compared that with a major tax cut under Biden’s predecessor Donald Trump.
“The Biden-Harris Administration’s student debt relief plan provides breathing room to tens of millions of working families. It gives people who have been struggling with student debt that shot they want at starting a business, buying that first home, or just having a slightly easier time paying the monthly bills,” Abdullah Hasan said. “It’s a stark contrast to the Trump tax bill, which ballooned the deficit by nearly $2 trillion and provided the vast majority of benefits to big corporations and the wealthiest individuals.”
The White House also circulated a memo pushing back on the CBO estimate, noting that it assumed a 90% participation rate in the forgiveness program — though similar, smaller-scale programs had much lower participation.
The White House memo challenged how the CBO arrived at $400 billion, suggesting that the agency’s own logic pegged the number at around $250 billion.
The debt cancellation program is expected to open for applications in October.
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