President Joe Biden’s plan to forgive student loan debt for many borrowers will cost roughly $400 billion, according to a Congressional Budget Office estimate released on Monday, rekindling a debate over the cost of student debt forgiveness and whether the plan will accelerate inflation.
The CBO also estimated Biden’s decision to pause student loan payments through the end of the year—extending a pause that began in 2020—will cost another $20 billion.
The estimates come one month after Biden offered to forgive $10,000 for all federal student loan borrowers who earn less than $125,000, and $20,000 for borrowers who received federal Pell grants offered to low-income students.
The CBO estimated 95% of student loan borrowers will qualify for forgiveness, 90% of eligible borrowers will apply for debt cancellation, 65% of eligible people received at least one Pell grant and 45% of eligible borrowers will see their entire balance wiped away.
The $400 billion figure is in line with an August estimate by the conservative National Taxpayers Union, which said Biden’s forgiveness program would cost around $2,500 per taxpayer on average, though taxpayers with incomes below $100,000 would shoulder a smaller burden.
By comparison, the program’s cost amounts to almost half of what the federal government budgets for annual military spending, and roughly 7.5% of total federal spending this year.
Biden announced his debt forgiveness plan last month, delivering on a campaign promise during the 2020 election. The plan was lauded by many Democrats, but it has faced criticism from the right about its cost and the potential impact it could have on already-high inflation, as well as from the left, which has argued it does not do enough to help former and future students. In a statement last month, the White House called the growing student debt a “significant burden on America’s middle class” that makes it difficult for borrowers to build wealth. Last month, Biden also extended a pause on loan repayments that began at the start of the pandemic through the end of 2022, setting repayment to start back up in January. His administration had already forgiven roughly $32 billion in student debt for more targeted groups before making the announcement.
$1.6 trillion. That’s how much money an estimated 43 million borrowers held in federal student loan debt, as of June 30, according to the CBO.
News of the cost sparked criticism from Republican lawmakers and business-owners. Rep. Mariannette Miller-Meeks (R-Iowa) tweeted that “President Biden isn’t forgiving student loans—he’s charging hardworking Americans $400 billion,” and Republicans on the House Education and Labor Committee called it a “boondoggle” that is “burying taxpayers alive.”