President Joe Biden’s student loan cancellation plan will cost about $400 billion over 30 years, according to the Congressional Budget Office.
Biden announced last month that he plans to forgive $10,000 in federal student loans for borrowers who earn less than $125,000 a year or have a household income of more than $250,000. Low-income Pell Grant borrowers receive an additional $10,000.
In addition to debt forgiveness costs, the CBO estimates the cost of Biden’s student loan moratorium to reach $20 billion between September and December 2022.
The CBO is a nonpartisan organization that calculates the cost of federal spending and Congressional spending plans. Its current analysis does not include the cost of adjusting to cash-based payment plans. Biden’s executive order lowered the student loan repayment limit for borrowers to 5% of their income, down from 10%. The Committee on a Responsible Federal Budget, a think tank that opposes Biden’s student loan plan, estimated that the change would cost an additional $120 billion.
According to the White House, more than 40 million Americans could be affected by the student loan changes, and half of them could lose all of their student loan debt.
The loan waiver application should be available in early October. At Monday’s White House briefing, press secretary Karine Jean-Pierre said the administration would receive information on the application process soon.
About 8 million borrowers will be forgiven because the Education Department already has information about their finances, according to the White House.