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Biden student loan cancellation will cost taxpayers $400 billion

The plan has attracted considerable criticism from Republicans.

Published: September 26, 2022 4:18pm

Updated: September 26, 2022 5:21pm

A Monday report from the Congressional Budget Office (CBO) estimates that President Joe Biden's plan to erase large amounts of U.S. student loan debt will cost taxpayer's roughly $400 billion.

In late August, Biden announced that he would forgive borrowers up to $10,000 in student loan debt should they make less than $125,000 annually and up to $20,000 in student loan debt for Pell grant recipients. Roughly 60 percent of borrowers received Pell grants, according to the New York Times.

The CBO cautioned that its estimate was likely lower than the final cost of the Biden plan and pointed to the administration's suspension of student loan repayments through the end of 2022 as a potential source of greater expense, per the outlet.

CBO's $400 billion estimate is somewhat on the conservative side, as the University of Pennsylvania's Wharton School of Business has estimated the total cost as being closer to $1 trillion. Part of the disparity in estimate totals is the Wharton School's projection that debt cancellation will drive additional borrowing in part due to the cap on loan repayments at 5% of the borrower's income.

The plan has also attracted considerable criticism from Republicans who assert that the plan places a disproportionate burden on low-income taxpayers to the direct benefit of those with the highest earning potential.

"85% of the American people are going to be paying for 15% of the people that have the student loans," Texas Republican Rep. Troy Nehls said of the plan upon its announcement.

The White House, however, has remained adamant that it will pursue the endeavor in the face of such objections and criticized the CBO estimate as "highly uncertain," per the NYT.

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