Biden's student loan debt 'forgiveness' plan could add up to $750 billion to national deficit: Report

The Biden administration's latest plan to wipe out federal student loan debt for millions of borrowers could add up to $750 billion to the national deficit, according to a Tuesday report from the Committee for a Responsible Federal Budget.

So far, the White House has announced $150 billion in so-called student loan "forgiveness" programs over the last year following the Supreme Court's June decision to reject unilateral loan cancellations. The previously rejected program would have wiped out $430 billion in borrower debt.

Since then, the Biden administration has ignored the court's ruling and enacted numerous similar but smaller programs to zero out federal student loan debt. Many of the cancellation announcements were rolled out through the White House's newest income-driven repayment program, Saving on a Valuable Education Plan, which sets monthly repayment amounts based on borrowers' incomes. According to the administration, roughly 8 million Americans are currently enrolled in SAVE. Over half of enrollees have a monthly payment of $0, and more than one million others pay less than $100 per month.

The Education Data Initiative reported an outstanding federal student loan debt balance of $1.602 trillion with 43.2 million borrowers. Federal loans account for 92.8% of all student loan debt, it noted.

The CRFB's report read, "Elements of the plan in today's proposed rule would cost nearly $150 billion, according to the Department of Education. However, this excludes a proposal to allow the Secretary of Education to cancel debt for those facing hardship or likely to default. Including this provision, we estimate the plan could cost $250 billion to $750 billion, depending on how the additional cancellation is designed."

The Biden administration's new plan would cancel accumulated interest for student loan borrowers with balances higher than the amount they initially borrowed. To cover these expenses, taxpayers would need to shell out $73 billion, CRFB estimated.

Borrowers in standard repayment who are eligible for cancellation but did not apply for the administration's program will also have their debt automatically wiped out. The nonprofit organization stated that would total another $9 billion.

Additionally, under the administration's plan, loans that have been in repayment for more than 20 to 25 years will be zeroed out, costing taxpayers $14 billion.

Borrowers who took out loans to participate in "low-financial-value programs" will see their outstanding account balances drop to zero. The CRFB estimates that it will cost $35 billion.

The administration will cancel debt from Federal Family Education Loans, costing another $17 billion.

Individuals "facing hardships" or likely to go into default will also be relieved of their debt. The CRFB estimated that this could cost anywhere from $100 billion to $600 billion.

"The Department of Education has estimated the first four components of the plan would cost $147 billion over a decade, with half the cost stemming from the cancellation of accumulated interest," the report stated.

The CRFB noted that the cancellation for hardships is "by far the most unclear and potentially the most costly part" of the administration's proposal, noting that it "could be both wide-ranging and ongoing."

The Biden administration has not clearly defined what constitutes an eligible hardship but mentions more than a dozen possible criteria, including household income, assets, total debt, current repayment status, age, disability, and health care expenses.

"In total, our $250 billion to $750 billion estimate for the total cost of the plan would be in line with the cost of the Administration's $400 billion blanket debt cancellation, which was ruled illegal by the Supreme Court. It would be on top of more than $600 billion of debt cancellation already enacted through unilateral executive action," the report read.

The CRFB warned that the sweeping debt cancellations would "put upward pressure on inflation and interest rates by supporting stronger demand."

Eighteen states filed two separate lawsuits against the Biden administration over its SAVE plan.

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