- A new report from the Congressional Budget Office reveals that student loan relief will cost $400 billion.
- This figure also does not take into account losses due to reforms to income-based reimbursement plans.
- But the figure pales in comparison to defense spending and will benefit millions of borrowers.
In late August, President Joe Biden finally fulfilled a long-awaited campaign promise and canceled up to $20,000 in student loan debt for certain borrowers – a move that immediately drew ire from the right about its fairness and its potential cost.
Now, the nonpartisan Congressional Budget Office is shedding light on the cost of the relief: $400 billion, plus $20 billion from outstanding loan payments and suspended interest through December. That $400 billion comes from the difference between the amount borrowers had to repay before the cancellation announcement and the amount they will pay now, with CBO data projecting the potential impact over the next 30 years.
The number is “even worse than we thought,” Marc Goldwein, senior vice president for policy at the Committee for a Responsible Federal Budget, told Insider. “It’s just debt cancellation. It doesn’t take into account revenue-driven repayment reforms.”
“It’s almost unthinkable that the administration would announce such a major policy and not even know, or even tell us, how much it costs – in particular, we’re talking about something that costs over $400 billion,” he said. Goldwein.
It’s a number that will likely fuel lingering GOP concerns about the cost of Biden’s policies. The CBO estimates partially answer questions raised by Representatives Virginia Foxx and Richard Burr. Foxx, a Republican from North Carolina, has been an outspoken opponent of Biden’s relief plan – and has previously introduced legislation to preemptively block it.
The estimate “shows that this administration has lost all sense of fiscal responsibility,” the North Carolina Republican said in a statement. “Rather than work with Congress to reduce college fees, President Biden chose to bury the American people in our unsustainable debt,” Foxx said.
However, the Government Accountability Office found in July that the government was already losing money on federal student loans in part because of pandemic-related pauses, even before Biden announced the cancellation. The $400 billion also pales in comparison to major administration spending, such as $796 billion for defense in 2022.
Student loan relief will disproportionately impact black and Latino borrowers, millennials, and public servants such as teachers, police, and nonprofit workers. A Census Bureau report found that black and Hispanic women will see the largest reductions among student loan borrowers, with 5.4% and 4.7%, respectively, seeing their loans completely forgiven. Borrowers who will see their debts completely erased have previously told Insider that the relief is life-changing.
“Today’s CBO estimate makes it clear that millions of middle-class Americans have more breathing space thanks to President Biden’s historic decision to cancel student debt,” said Senators Elizabeth Warren and Chuck Schumer — two Democrats who have been on the frontlines pushing for broader relief — said in a joint statement.
“We do not agree with all of the CBO’s assumptions underlying this analysis,” they said, “but it is clear that the pandemic payment pause and student debt cancellation are policies that demonstrate how government can and should invest in workers, not the wealthy and billionaire corporations.”