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Biden plan to cancel some U.S. student loan debt will cost $400 billion -CBO

Published 09/26/2022, 02:21 PM
Updated 09/26/2022, 05:41 PM
© Reuters. FILE PHOTO: U.S. President Joe Biden attends a performance by British rocker Elton John at the White House in Washington, U.S., September 23, 2022. REUTERS/Evelyn Hockstein/File Photo

By David Shepardson and Eric Beech

WASHINGTON (Reuters) -U.S. President Joe Biden's executive actions cancelling some student loan debt will cost about $400 billion, about a quarter of funds owed, the Congressional Budget Office (CBO) said on Monday.

As of June 30, 43 million borrowers held $1.6 trillion in federal student loans. About $430 billion of that debt will be canceled, CBO estimated. CBO previously projected that some of the funds canceled by Biden's action would eventually have been forgiven anyway.

Of 37 million borrowers with direct loans from the federal government, CBO estimated 95% of borrowers meet the income criteria for eligibility and 45% of income-eligible borrowers will have their entire outstanding debt canceled.

In August, the White House released a "cash flow" estimate of foregone loan repayments of $24 billion a year, or about $240 billion over a decade - assuming that 75% of eligible borrowers apply.

White House Chief of Staff Ron Klain said on Twitter (NYSE:TWTR) the CBO estimate is a 30-year score rather than a more common 10-year estimate.

He said the CBO is consistent with the White House estimate and CBO "puts the first year cost at $21B."

Reuters reported in August that non-government budget analysts projected the program's total 10-year cost at $500 billion to $600 billion, including extending a repayment pause on all federal student loans through Dec. 31 and reducing future payments based on income.

The U.S. government in March 2020 temporarily suspended interest and payments on federal student loans at the start of the COVID-19 pandemic. The extension of that pause from September through Dec. 31 will increase outstanding student loan costs by a further $20 billion, CBO said.

The CBO said its $400 billion "present-value" cost estimates do not include any effects of the actions impacting income-driven repayment plans, which the Committee for a Responsible Federal Budget estimates will cost a further $120 billion.

© Reuters. FILE PHOTO: U.S. President Joe Biden attends a performance by British rocker Elton John at the White House in Washington, U.S., September 23, 2022. REUTERS/Evelyn Hockstein/File Photo

Bharat Ramamurti, deputy director of the White House's National Economic Council, told reporters last month the plan was fiscally justified because the federal deficit was on track for a $1.7 trillion reduction for fiscal 2022 compared to the prior year.

CBO acknowledged its estimates include big unknowns, especially the uncertain projection "of how much borrowers would repay if the executive action canceling debt had not been undertaken and how much they will repay under that executive action."

Latest comments

Just make sure not to put blame on russia or any other country for the inflation. Take responsibility for the actions.
Nor blame Biden, especially when the inflation is global (in fact, it's higher in other countries than in the US).
This administration has to be the most economically inept in history! They have zero understanding of the basics and are literally countering what the FED is trying to achieve for the sake of grabbing votes in the midterms? Are people really so stupid as to be unable to see themselves getting used as pilitocsl pawns? By the way he doesn’t have the authority to cancel student debt anyway, thats congressional not executive so it will never happen anyway.
It's not just economical; it's also a military issue -- Russian military.
Rate increases are useless with excessive fiscal spending.
Easy, print 400 billion and just blame the inflation on Russia
There's also the CCP's shutting down cities.
Trumps tax cuts...$10 trillion... most of it going to corporations and the rich.
No coincidence that Trump is rich and owns corporations.
Ah no problem tomorrow will be mortages!
What kind of US D1ctat0r can spend that amount without an act of Congress?
This form of currency is dead & thry know this. So print print print - need to step back and look at what is really going on
What's going on is USD making new ATH.
This is just what the Democrats in Washington and their President want-more debt; higher inflation; and increased tax burdens for working Americans, businesses and corporations (who supply  the jobs).  Please, remember all of this when voting!
$400 billion paid by many taxpayers who never went to college
  "taxpayers who never went to college" but who worked hard to put their children into college.  The American dream.
still less debt than what trump put on our books
Good job, Joe! Another failure to add to your list.
Trump U. students got their loans forgiven.
  There's no fraudulent Biden U.?
Biden needs to cancel the US national debt.
If the CCP invades Taiwan, the US can cancel the CCP's debt holdings.
And destroy the good faith and credit of what little is left in the $USD. "Great plan."
  If the CCP attacks Taiwan, then it'll attack US assets, too.  Do the accounting.
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