Taxpayer bill for Biden student loan bailout could reach $600 billion, warns budget watchdog

President Joe Biden's unilateral plan to cancel up to $20,000 of student debt for certan borrowers will bust the federal budget, send historically high inflation rocketing still higher, and saddle taxpayers with up to $600 billion dollars in new debt, budget watchdogs and GOP lawmakers are warning.

A Wharton study estimates that Biden's plan will cost about $300 billion in taxpayer funds. The Committee for a Responsible Federal Budget put the estimated cost of the cancellation plan between $400 and $600 billion.

When factoring in the student loan payment moratorium during the pandemic, the organization estimated that Congress has spent "between $700-$900 billion on student debt cancellation and relief since the start of the pandemic."

"This announcement is gallingly reckless — with the national debt approaching record levels and inflation surging, it will make both worse," said CRFB President Maya MacGuineas. "Policymakers have already spent $300 billion on student debt relief — none of it paid for, and this would add another $400 to $600 billion, again none of it paid for. This action by the White House is completely at odds with their talk of deficit reduction. It could add twice as much to the deficit as was just saved from the Inflation Reduction Act, completely eliminating any deficit reduction and then some. With the stroke of a pen, the president undid a year's worth of work on the fiscal front."

MacGuineas said the cost of college tuition is a "huge problem" in the U.S. that needs to be addressed, but Biden's plan isn't the way to do it.

"Forgiving $10,000 to $20,000 per person is costly and appears to be more of a political stunt than anything close to good policy," she said in a statement. "It would do nothing to actually make education more affordable, and if anything, this policy will drive up tuition costs while raising prices on a variety of other goods and services for ordinary Americans."

Alabama Republican Rep. Mike Rogers said the nation is "already struggling with record-high inflation and a recession" and Biden's "student debt scheme will only force Americans, who have already paid off their debts or who did not take on student debt, to foot the bill for his socialism."

Virginia Republican Rep. Virginia Foxx, ranking member of the House Education and Labor Committee, described Biden's plan as a debt forgiveness scam.

"President Biden will say and do anything to appease his radical progressive base, even if it means bankrupting our country and kneecapping taxpayers in the midst of an inflation crisis," she said in a statement. "This is a slap in the face to those who never went to college, as well as borrowers who upheld their responsibility to taxpayers and paid back their loans. It's a signal to every freshman stepping foot on campus to borrow as much as they can because taxpayers are picking up the tab."

She suggested that Congress should pass the Responsible Education Assistance through Loan (REAL) Reforms Act to enact "responsible reforms to the federal loan program."

Biden is "forcing hardworking American taxpayers to pay for his student loan cancellation scheme," said Rep. Elise Stefanik, House GOP Conference chair.

"In the midst of skyrocketing inflation and a recession, the Biden administration once again doubles down on its reckless spending at the expense of the American people," added the New York Republican.

"President Biden's student loan debt forgiveness scheme is an insult to the millions of hardworking Americans who have worked so hard to pay off their student loans and other debts," echoed Georgia Republican Rep. Barry Loudermilk. "Not only does this decision raise legal concerns, it will also not help inflation and will cost American taxpayers an estimated $300 billion. This is yet another example of just how out of touch President Biden is with a majority of Americans who just want us to rein in out-of-control inflation, need affordable goods, gas, groceries, less crime, and secure borders." 

Florida Republican Rep. Vern Buchanan said that Biden's "reckless, unilateral student loan giveaway is unfair to the 87% of Americans without student loan debt and those who played by the rules."

In the past, House Speaker Nancy Pelosi said the president doesn't have the unilateral authority to forgive debt.

House Minority Whip Steve Scalise, a Louisiana Republican, said Biden has shifted personal student loan debt onto taxpayers.

"This isn’t imaginary money," he said. "Biden just shifted all that student loan debt onto other taxpayers who are already dealing with high inflation. Debt 'forgiveness' is just another liberal scam for the elites paid for by working class Americans."

Ways and Means Committee Republicans cited Larry Summers, an economist who served as director of the National Economic Council under former President Obama.

"Even former Obama-Biden top economic advisor Larry Summers warned about Biden's mass student loan giveaway," they wrote on Twitter, quoting the former Treasury Secretary: "'Student loan relief is not free. It would be paid for. Part of it would be paid for by the 87 percent of Americans who do not benefit but lose out from inflation.'"

Democrats are applauding Biden's plan as a step toward making college more affordable, as tuition costs continue to rise.

"This is a good step forward to help millions of struggling borrowers, especially those from underserved communities working to make ends meet," said Democratic Rep. Juan Vargas.

Susan Rice, a White House domestic policy adviser, said on Wednesday that the U.S. Department of Education has the legal authority to unilaterally cancel student debt without congressional action.

New Mexico Democratic Sen. Martin Heinrich called Biden's debt forgiveness plan a "massive investment in America's working and middle class families."

The White House released a fact sheet on Biden's plan on Wednesday. Individuals earning less than $125,000 are eligible for up to $10,000 of forgiveness and up to $20,000 of forgiveness will apply to Pell Grant borrowers making under $75,000 annually.

Biden promised there will be a "short and simple form" available for debt forgiveness applicants released in the coming weeks. June 30, 2022 is the cutoff date for loans eligible for the forgiveness, according to Rice.