Student loan borrowers hold an August 25, 2022 rally in front of the White House to commemorate President Joe Biden’s cancellation of some federal student debt.
Paul Morigi | Getty Images Entertainment | beautiful pictures
President Joe Biden’s plan to cancel student loans will cost about $400 billion, according to the Congressional Budget Office.
Last month, Biden announced plans to forgive $10,000 federal student loans for borrowers earning less than $125,000 a year, or with a household income of less than $250,000 if filing jointly. . Low-income Pell Grant borrowers are eligible for an additional $10,000 cut.
In addition to the costs to write off that debt, the CBO estimates the cost of Biden’s suspension of student loan payments between September and December 2022 will total $20 billion.
The CBO is a nonpartisan agency that calculates the costs of federal revenue and spending plans for Congress. Its latest analysis does not include the cost of adjusting for income-based repayment plans. Biden’s executive order lowered the limit a borrower would have to pay on their student loans to 5% of their income, down from 10%. The Federally Responsible Budget Committee, an advisory group that opposes Biden’s student loan plan, has estimated the change will cost an additional $120 billion.
The White House says more than 40 million Americans could be affected by the student loan changes, and half of those could see their entire student debt forgiven.
It is expected that the beginning of October will have an application for debt forgiveness. At a White House briefing on Monday, press secretary Karine Jean-Pierre said the administration would soon have an update on the application process.
According to the White House, about 8 million borrowers will automatically receive forgiveness because the Department of Education already has their income information.