So what’s the price tag for President Joe Biden’s new plan for federal student loans, which includes canceling a large swath of the debt?
The cost to the U.S. government is likely between $440 billion and $600 billion over the next 10 years, with a central estimate of roughly $500 billion, according to one watchdog group, the Committee for a Responsible Federal Budget.
It will cost about $360 billion for the loan cancellations, $120 billion for a new income-driven repayment (IDR) program, and $20 billion for one final pause for loan repayments, according to the CRFB, which opposes Biden’s new plan, saying it’s “costly, inflationary and cynical.”
Meanwhile, analysts at the Penn Wharton Budget Model put the plan’s price tag at $605 billion, with $519 billion for cancellations, $70 billion for the new IDR program and $16 billion for the loan forbearance.
But Penn Wharton Budget Model’s team also said it’s possible the price tag could top $1 trillion.
“Depending on future IDR program details to be released and potential behavioral (i.e., “non-static”) changes, total plan costs could exceed $1 trillion,” the analysts wrote.
White House officials have faced many questions about the cost of Biden’s new plan for student debt and how it’s paid for.
The price tag “remains to be determined, and it will be a function of what percentage of eligible borrowers actually take up this opportunity,” said Biden’s domestic policy adviser, Susan Rice, during a press briefing on Wednesday.
When a reporter asked what the cost would be if all eligible borrowers take advantage of the program, Rice said, “I can’t give you that off the top of my head.”
White House press secretary Karine Jean-Pierre made similar points on Thursday afternoon about the likely price tag, saying during a press briefing that “it will depend on how many borrowers actually take up this opportunity before we have a real sense.”
Then, late Thursday in a CNN interview, Jean-Pierre said the cost of forgiving loans could be $24 billion a year, if 75% of eligible borrowers take part. That could imply a 10-year cost of $240 billion.
The White House spokeswoman during Thursday’s press briefing also drew questions about how Biden’s student-debt plan would be paid for.
“We do believe this will be fully paid for because of the work that this president has done with the economy, because of … what we have done to bring down the deficit,” Jean-Pierre said.
Another White House official, Bharat Ramamurti, addressed the pay-fors issue further at Friday’s press briefing, saying it was fair to say a 10-year price tag of roughly $240 billion could imply $1.5 trillion in deficit reduction this year, down from the $1.7 trillion that administration officials have touted.
Ramamurti, deputy director of Biden’s National Economic Council, also criticized the Penn Wharton Budget Model’s figures.
“I want to make totally clear that we don’t think that a trillion dollars is anywhere in the ballpark of what this is going to cost,” he told reporters. Ramamurti said the Wharton group’s upper-end estimate for the IDR program’s cost is “somewhat speculative,” and its assumption that 100% of eligible borrowers will apply for forgiveness is “not necessarily … reasonable.”
With November’s midterm elections nearing, Biden made his long-awaited announcement on student-loan forgiveness on Wednesday, saying his administration plans to cancel $10,000 in debt per borrower for individuals making under $125,000 a year or households making less than $250,000. There would be forgiveness of up to $20,000 for recipients of Pell grants.
The fate of Biden’s student-loan plan now likely rests with the U.S. court system, as legal challenges are expected.