Joe Biden’s plan to forgive thousands of dollars of student loan debt for millions of Americans will cost more than $400bn over three decades, the non-partisan Congressional Budget Office has estimated.
The high price tag was revealed by the CBO on Monday in a letter to Republican lawmakers who had asked for an assessment of its budgetary impact. The US president in August announced his executive action to cancel the student debt.
The student loan forgiveness scheme was cheered by progressive Democrats as a way to provide relief for millions of Americans saddled with student debt. It would cancel up to $10,000 in debt for those earning $125,000 or less.
However, it was heavily criticised by Republicans and some moderate Democrats for potentially stoking inflation at a time when it is already high and adding to the country’s fiscal burden in a way that was not finely targeted towards the lowest-income households.
The Biden administration had been coy about releasing its own assessment of the budgetary impact of the plan when it was announced.
The CBO acknowledged its own projections were “highly uncertain”, warning that in this case, “the most uncertain components are the projections of how much borrowers would repay if the executive action cancelling debt had not been undertaken and how much they will repay under that executive action”.
White House press secretary Karine Jean-Pierre defended the policy on Monday, telling reporters it was “an important step forward in giving people an opportunity to save some money and put money down on a house, to start their family”.
Chuck Schumer and Elizabeth Warren, the top proponents of the policy in the Democrat-controlled Senate, said that “in contrast to president [Donald] Trump and Republicans who gave giant corporations $2tn in tax breaks, president Biden delivered transformative middle-class relief by cancelling student debt for working people who need it most”.
But Republicans pounced on the CBO estimate as the latest symbol of the administration’s propensity towards excessive spending. Many are citing the move on the campaign trail ahead of the midterm elections in November.
“President Biden isn’t forgiving student loans — he’s charging hardworking Americans $400bn,” Mariannette Miller-Meeks, a Republican member of the House of Representatives from Iowa, wrote on Twitter.