Biden’s student loan relief could cost $400 billion, Congressional Budget Office says

Student borrowers hold a rally on August 25, 2022 outside the White House to celebrate President Joe Biden‘s cancellation of federal student debt.

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President Joe Biden’s student loan forgiveness plan will cost an estimated $400 billion, according to the Congressional Budget Office.

Biden announced a plan last month to forgive $10,000 in federal student loans for borrowers who earn less than $125,000 a year or whose household income is less than $250,000 if they file jointly. Low-income Pell Grant borrowers are eligible for an additional reduction of $10,000.

In addition to the costs of canceling that debt, the CBO has estimated that the cost of Biden’s pause on student loan repayments from September to December 2022 will total $20 billion.

The CBO is a nonpartisan agency that calculates the costs of federal revenue and spending plans for Congress. Its latest analysis does not include the cost of adjustments to income-driven repayment plans. Biden’s executive order lowered the cap a borrower would have to pay on their student loans to 5% of income, from 10%. The Committee for a Responsible Federal Budget, a think tank opposed to Biden’s student loan plan, estimated the change will cost an additional $120 billion.

The White House says more than 40 million Americans could be affected by changes to student loans, and half of them could see all of their student debt eliminated.

The application for requesting loan forgiveness should be available in early October. During Monday’s White House briefing, press secretary Karine Jean-Pierre said the administration would have updates on the candidacy process “very soon.”

About 8 million borrowers will automatically receive a discount, according to the White House, because the Department of Education already has their income information.

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