WASHINGTON—President Biden’s plan to wipe out massive student loan debt for tens of millions of borrowers could cost about $400 billion, the nonpartisan Congressional Budget Office said in a report Monday. said.
The estimate has renewed debate between supporters of student debt forgiveness and those who say the initiative will lead to reckless spending.
The CBO also said Biden extended the moratorium on federal student loan repayments through the end of the year, so the full plan could be even higher.
In August, Mr. Biden announced plans to forgive $10,000 of debt for those earning less than $125,000 a year and $20,000 to those who were receiving Pell grants for low-income families. The CBO expects that 90% of his 37 million borrowers who have direct federal loans will take advantage of the debt forgiveness once it becomes available.
The White House on Monday indicated it would move forward with its plans despite criticism from conservative critics who had promised legal challenges. equates to “noise,” he said, adding that Americans covered by a major portion of President Biden’s student loan bailout plan “should be able to apply for forgiveness soon.” “
In a call with reporters on Monday, administration officials called the estimates “highly uncertain.”
Still, the official timing of the debt relief is unknown. The education ministry said it would set up an application process by the end of the year.
About 60% of student loan borrowers receive Pell grants, most of whom come from families earning less than $30,000 a year. The Department of Education estimates that 27 million borrowers are eligible for relief of up to $20,000.
Millions of other borrowers are eligible for $10,000 in debt relief as long as their annual income is less than $125,000 or their household income is less than $250,000. Borrowers will be evaluated based on their reported income in 2021 or 2020.