Biden's Student-Debt Relief to Cost $400 Billion Over Decade, CBO Says

  • In Business
  • 2022-09-26 20:58:41Z
  • By Bloomberg

(Bloomberg) -- President Joe Biden's decision to forgive some federal student debt will cost the US Treasury at least $400 billion, the Congressional Budget Office estimated.

Most Read from Bloomberg

  • John Paulson on Frothy US Housing Market: This Time Is Different

  • UK Market Selloff Slams Gilts, Pound, Piling Pressure on BOE

  • Wall Street Banks Prep for Grim China Scenarios Over Taiwan

  • Stocks, Commodities Drop; US Treasury Yields Surge: Markets Wrap

  • Interpol Issues Red Notice for Terra's Do Kwon, Korea Says

Biden in August announced student debt relief of $10,000 per borrower, subject to income caps of $125,000 per individual and $250,000 per household. An additional $10,000 can be forgiven for Pell Grant recipients. The CBO says that the move will reduce the present value of outstanding loans by $400 billion based on 30 years of reduced future cash inflows.

The non-partisan budget agency said Biden's suspension of student debt payments through the end of the year could cost an additional $20 billion. It did not account for changes Biden made to income-driven repayment plans. The watchdog Committee for an Responsible Federal Budget pegs the cost of those changes at an additional $120 billion.

Read More: Follow These Steps to Get Your Student Loan Forgiveness

However, the CBO says its estimate is "highly uncertain" because of assumptions it makes about the level of repayments that would have occurred absent the debt relief depend on future economic conditions.

For comparison, the tax and climate legislation known as the Inflation Reduction Act, which passed earlier in August, was scored as reducing deficits over 10 years by $58 billion, with an additional reduction of $180 billion factored in from anticipated new revenue from more tax audits.

Read More: Millions Eligible for Student Debt Relief Live in Battleground States

"This might be the most costly executive action in history," CRFB President Maya MacGuineas said in a statement. "It's unacceptable that the president would implement it without offsets and without Congressional approval."

The report was requested by Senator Richard Burr and Representative Virginia Foxx, two North Carolina Republicans. GOP lawmakers have criticized Biden's debt forgiveness as unfair to students who had paid off their loans and to taxpayers who never went to college.

"Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt," Foxx said in a statement.

The Biden administration and its allies countered the criticism of the student debt plan.

"It gives people who have been struggling with student debt that shot they want at starting a business, buying that first home, or just having a slightly easier time paying the monthly bills," Abdullah Hasan, an administration spokesperson, said in a statement.

Senate Majority Leader Chuck Schumer and leading relief advocate Senator Elizabeth Warren compared it to the Republican-backed tax cuts passed during former President Donald Trump's administration.

"In contrast to President Trump and Republicans who gave giant corporations $2 trillion in tax breaks, President Biden delivered transformative middle class relief by canceling student debt for working people who need it most," they said in a statement.

(Updates with congressional, White House reaction, beginning in eighth paragraph. An earlier version corrected the time span for the cost and eliminated a comparison to earlier legislation)

Most Read from Bloomberg Businessweek

  • The Sneaky Genius of Apple's AirPods Empire

  • The Supreme Court Is About to Display Its Power Imbalance Again

  • US Is Inflating Its Debt Away After Unprecedented Spending Binge

  • This Is What Life's Like in the World's Strictest Covid Zero City

  • To Find Success at Work, Match Your Job With Your Personality

©2022 Bloomberg L.P.


More Related News

Treasury Yields Leap as US Services Data Add Fuel to Fed Bets
Treasury Yields Leap as US Services Data Add Fuel to Fed Bets

(Bloomberg) -- Treasuries sold off as stronger-than-expected US economic data added fuel to traders' bets on how high Federal Reserve interest rates might...

Manchin's Energy-Permitting Reform Bill May Get Another Chance

(Bloomberg) -- A previously-stalled legislative effort to fast-track energy projects backed by West Virginia Senator Joe Manchin could be attached to a must-...

ECB Likely to Hike by Half-Point in December, Makhlouf Says
ECB Likely to Hike by Half-Point in December, Makhlouf Says

(Bloomberg) -- The European Central Bank will probably lift borrowing costs by a half-point this month, according to Governing Council member Gabriel...

'Huge, Missing and Growing:' $65 Trillion in Dollar Debt Sparks Concern

(Bloomberg) -- Institutions outside the US are holding an estimated $65 trillion in "missing" dollar debt off their balance sheets through currency...

Activision's Risk-Reward Tradeoff Defies Microsoft Deal Doubt

(Bloomberg) -- For analysts following Activision Blizzard Inc., it's almost as if the video-game company never decided to sell itself to Microsoft Corp. for ...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Business