Sept. 27 (UPI) — President Joe Biden’s plan to alleviate the burden of student debt shouldered by millions of borrowers could cost the United States some $400 billion over the next 30 years, according to estimates from the Congressional Budget Office.
The president in the executive action also capped monthly payments for undergraduate student loans at 5% of a borrower’s discretionary income while continuing the pause on federal student loan repayments through the end of December.
In its report on Monday, the CBO said the cost for the pause to student loan repayments amid the COVID-19 pandemic will have a price tag of about $20 billion on top of the $400 billion cost for the debt forgiveness plan.
Some 43 million borrowers hold about $1.6 trillion in federal student loans, of which $430 billion will be canceled under Biden’s plan, the CBO said, which added that its projections are based on calculations that show 95% of the 37 million borrowers with direct loans from the federal government are eligible for the president’s program and that it believes 90% of those eligible will apply for debt cancelation.
It said it expects the plan will cancel the entire outstanding debt for 45% of eligible borrowers.
The report did warn, however, that its estimates are “highly uncertain” as it cannot know how much borrowers would have repaid in absence of Biden’s executive actions.
Biden announced the plan last month amid mounting pressure from Democratic politicians and advocates who had been calling on him for months to make good on his campaign promise to provide student debt relief.
Senate Democratic leader Chuck Schumer of New York and Sen. Elizabeth Warren of Massachusetts had been among those calling on Biden to forgive student debt and defended the plan Monday against the CBO’s estimations.
The Democratic pair said the CBO report shows that millions of middle-class Americans will benefit from the plan while contrasting it to the $2 trillion in tax breaks the former Trump administration gave to corporations.
“President Biden delivered transformative middle-class relief by cancelling student debt for working people who need it most,” they said in a joint statement.
“We don’t agree with all of CBO’s assumptions that underlie the analysis, but it is clear the pandemic payment pause and student debt cancellations are policies that demonstrated how government can and should invest in working people, not the wealthy and billionaire corporations.”
On the other hand, the report has given Republicans and opponents of the Biden administration fuel to argue against the plan.
Arkansas Gov. Asa Hutchinson chastised Biden’s move Monday as being “fundamentally unfair” to Americans who “took a different path” and Rep. Thomas Massie of Kentucky described it as “unconstitutional.”
“A president can’t just give away $400 billion,” Massie tweeted.
The Committee for a Responsible Federal Budget, which previously said Biden’s plan would cost upwards of $650 billion over the next decade, said the CBO report is an under estimation as it didn’t take into account other costs.
“CBO’s new estimate confirms the outrageous cost of the White House plan to cancel large amounts of student debt,” Maya MacGuineas, the committee’s president, said in a statement. “This might be the most costly executive action in history.”
The White House has not yet released its own estimate on the plan’s cost.
White House press secretary Karine Jean-Pierre defended the cancellation of student debt Monday during a press conference, saying the Biden administration believes it was an important move to help millions of Americans.
“There’s always a lot of noise around the student loan debt relief,” she said. “And the bottom line is this is going to give some breathing room to … tens of millions of Americans.