Student loan activists protested outside the White House a day after President Biden announced plans to cancel $10,000 in student loan debt for people earning less than $125,000 a year in Washington, DC, on August 25, 2022.
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Federal student borrowers can get up to $10,000 in debt relief — or $20,000 if they have Pell Grants — under President Joe Biden’s new plan.
However, critics say taxpayers will ultimately choose the tab, estimated to be worth hundreds of billions of dollars.
That could lead to a $2,500 burden per taxpayeraccording to calculations from the National Taxpayers Union, a financially conservative advocacy group.
“There is a shift in wealth from society at large to people borrowing to go to college right now,” said Andrew Lautz, federal policy director for the National Taxpayers Union.
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“That has consequences for consumers,” Lautz said. “It has consequences for taxpayers.”
The average burden per US taxpayer would be $2,503.22, according to New estimates from the National Taxpayers Union based on the specifics of the Biden plan. Federal student loan forgiveness applies to individuals earning less than $125,000 and couples earning less than $250,000.
To be sure, this does not mean that taxpayers will immediately face $2,500 in higher taxes.
But the additional $400 billion cost of Biden’s student debt relief plan would add to the government’s debt burden. The estimated cost per taxpayer is based on the assumption that policymakers will need to offset the total amount of the exemption through tax increases, spending cuts, borrowing, or a combination of such strategies. .
The National Taxpayers Union’s calculation is based on total debt forgiveness costs of more than $400 billion divided by the total number of U.S. taxpayers of 158 million.
Notably, costs will not be spread across income ranges, according to estimates by the National Taxpayers Union.
Low-income taxpayers, earning less than $50,000, will have an average additional cost per taxpayer of $190. That would add up to about $1,040 for those with adjusted gross income between $50,000 and $75,000; $1,774 for those between $75,000 and $100,000; and $3,791 for income between $100,000 and $200,000.
Taxpayers with the highest income, between $200,000 and $500,000, will have an average additional cost of $11,940.
‘Convert one type of loan to another’
Canceling student debt will boost inflation in the short term more than the recently enacted Inflation Reduction Act will reduce it, the Federal Budget Committee found in a statement. recent analysis. Furthermore, it found that canceling student debt would also undermine the deficit cuts in legislation recently passed by Democrats.
While the move will erase millions of student loans, it will also mean the government will borrow on their behalf.
Responsible Federal Budget Committee estimate Biden’s extensive debt cancellation would cost between $330 billion and $390 billion. The master plan will cost between $440 billion and $600 billion over the next 10 years, according to the nonpartisan organization, with a central estimate of approximately 500 billion dollars.
“This is not paid for,” said Maya MacGuineas, chair of the Federal Budget Committee responsible. “This is just transferring another type of borrowing.”
The The Penn Wharton budget model now estimates Debt cancellation alone would cost $519 billion. The study found that a loan ban would cost another $16 billion, while a new income-driven repayment could cost $70 billion.
About 75% of student loan cancellations will benefit households earning $88,000 or less per year, according to the Penn Wharton Budget Model.
The Congressional Budget Office has yet to assess the total cost of the policy.
Biden’s Pardon Plan Failed root cause on why student loan borrowers have run into such huge debt burdens in the first place, both Lautz and MacGuineas said.
“College education is one of the biggest conundrums you really need to learn about how colleges and graduate schools are funded and what kinds of changes are going to make it,” says MacGuineas. should be more reasonable”. “This doesn’t accomplish that.”
