President Joe Biden’s executive action cancelling up to $20,000 in student loan debt from some borrowers will add $400 billion to the federal debt, Congressional Budget Office director Phillip Swagel wrote Monday.
Biden announced on Aug. 24 that the federal government would forgive $10,000 in student loans for all individuals earning below $125,000 a year, and $20,000 for borrowers who received Pell grants. Republicans and some Democrats blasted the move, which will disproportionately benefit middle- and upper-class Americans, in particular those with graduate degrees.
“As of June 30, 2022, 43 million borrowers held $1.6 trillion in federal student loans. About $430 billion of that debt will be canceled, CBO estimates,” Swagel wrote in a letter to North Carolina Republicans Richard Burr and Virginia Foxx, the ranking members on the Senate Health, Education, Labor and Pensions Committee and the House Education and Labor Committee, respectively.
CBO estimates that the cost of outstanding student loans to the federal government will increase by about $400 billion because of an executive action canceling some debt. https://t.co/FgEHBn2XP6
— U.S. CBO (@USCBO) September 26, 2022
Ninety-five percent of federal student loan holders qualify for debt relief, Swagel added, although he noted that his agency’s projections are “highly uncertain.” (RELATED: Biden’s Student Loan Cancellation Is Illegal, Critics Say)
Previous estimates have found that the cancellation could cost taxpayers anywhere from $230 billion to roughly $600 billion. The action more than eliminates savings from the Inflation Reduction Act. The Committee for a Responsible Federal Budget estimates that the reconciliation package would save taxpayers $300 billion over ten years.
Republicans have promised that they will pass legislation rolling back the forgiveness plan if they retake one or both chambers of Congress following the November midterms.
“A blanket forgiveness of student loans only benefits a small percentage of the population at the expense of millions of other hardworking Americans. Those who have saved to pay for the education they chose to get, or have no debt at all because they chose a valuable career that doesn’t require a college degree, shouldn’t be on the hook to bail out folks that voluntarily took on debt and now want someone else to pay for it,” Republican Florida Sen. Rick Scott said before introducing legislation that would reinstate the loans.