Student loan relief to cost $400bn, Congressional Budget Office reports

Election-season move will benefit millions of Americans

John Bowden
Washington DC
Monday 26 September 2022 22:20 BST
Biden announces student loan debt cancellation plan

President Joe Biden’s long-awaited action on student loan relief will cost the federal government $400 bn in loan repayments to the US Treasury, the Congressional Budget Office declared on Monday.

The sum, while a sizable investment, is on the lower end of estimates for the plan Mr Biden announced in August that, at the time, was projected to cost as much as $600 bn by some analysts.

The cost of the president’s decision is coupled with an additional $20bn in lost revenue that the CBO projects will occur as a result of the Department of Education freezing loan repayments through the end of 2022.

The CBO itself, however, cautions that the estimates from its report are “highly uncertain”.

“The most uncertain components are the projections 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. Those projections depend in part on future economic conditions and on how the terms of loans might be modified in the future. CBO will incorporate updated information about those factors in its baseline projections early next year,” wrote Philip Swagel, the CBO’s director.

Mr Biden’s decision was met with cheers from progressives and many Democrats, though some of the former category wished the president had gone further and canceled all federal student loan debt. Conservatives have latched on to the argument that the move is unfair to Americans who already paid off their student loan debt in its entirety, though even some of those Americans will be eligible for refunds under the plan.

The timing of the decision also enraged the right as it comes just a few months before voters are set to decide control of Congress in the midterm elections; Mr Biden’s approval ratings have steadily ticked up over 2022, causing consternations for Republicans hoping to see their party retake one or both chambers.

The Biden administration had faced calls for months to take definitive action one way or the other on the issue. Since the president took office in 2021, his administration had continued a pattern of extending loan repayment freezes that while providing temporary relief for borrowers did little to alleviate the stress that many felt as each deadline approached.

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