CBO says Biden’s student loan forgiveness plan could cost $400 billion

Washington
CNN
—

President Joe Biden’s plan to forgive up to $20,000 in federal student loan debt for low- and middle-income borrowers could cost $400 billion, according to a Congressional Budget Office report released Monday.

Biden announced the forgiveness plan in August, after facing growing pressure from progressives to write off some student loan debt globally.

The Department of Education plans to issue an application for the program in October. No student debt has yet been cancelled.

The CBO, which conducts nonpartisan analysis for Congress, warned in the report that the estimates are « highly uncertain. »

The estimate is based on a number of assumptions, including the number of eligible borrowers who will apply, as well as the portion of outstanding federal student loan debt that may not have been repaid by anyway during the term of the loans due to other existing rebate programs, eg . These projections depend in part on future economic conditions, the CBO said.

The White House is expected to release its own estimate of Biden’s student loan forgiveness plan in the coming weeks. The administration previously said the plan would reduce cash flow by about $24 billion a year.

Under Biden’s plan, individual borrowers who earned less than $125,000 in 2020 or 2021 and married couples or heads of households who earned less than $250,000 a year in those years will see up to $10,000 of their canceled federal student loan debt.

If an eligible borrower also received a Federal Pell Grant while enrolled in college, the individual is eligible for debt forgiveness of up to $20,000. Pell Grants are awarded to millions of low-income students each year, based on factors such as their family size and income and the cost charged by their college. These borrowers are also more likely to struggle to repay their student debt and to end up in default.

This story has been updated with additional information.