Biden's student loan debt 'forgiveness' plan could add up to $750 billion to national deficit: Report



The Biden administration's latest plan to wipe out federal student loan debt for millions of borrowers could add up to $750 billion to the national deficit, according to a Tuesday report from the Committee for a Responsible Federal Budget.

So far, the White House has announced $150 billion in so-called student loan "forgiveness" programs over the last year following the Supreme Court's June decision to reject unilateral loan cancellations. The previously rejected program would have wiped out $430 billion in borrower debt.

Since then, the Biden administration has ignored the court's ruling and enacted numerous similar but smaller programs to zero out federal student loan debt. Many of the cancellation announcements were rolled out through the White House's newest income-driven repayment program, Saving on a Valuable Education Plan, which sets monthly repayment amounts based on borrowers' incomes. According to the administration, roughly 8 million Americans are currently enrolled in SAVE. Over half of enrollees have a monthly payment of $0, and more than one million others pay less than $100 per month.

The Education Data Initiative reported an outstanding federal student loan debt balance of $1.602 trillion with 43.2 million borrowers. Federal loans account for 92.8% of all student loan debt, it noted.

The CRFB's report read, "Elements of the plan in today's proposed rule would cost nearly $150 billion, according to the Department of Education. However, this excludes a proposal to allow the Secretary of Education to cancel debt for those facing hardship or likely to default. Including this provision, we estimate the plan could cost $250 billion to $750 billion, depending on how the additional cancellation is designed."

The Biden administration's new plan would cancel accumulated interest for student loan borrowers with balances higher than the amount they initially borrowed. To cover these expenses, taxpayers would need to shell out $73 billion, CRFB estimated.

Borrowers in standard repayment who are eligible for cancellation but did not apply for the administration's program will also have their debt automatically wiped out. The nonprofit organization stated that would total another $9 billion.

Additionally, under the administration's plan, loans that have been in repayment for more than 20 to 25 years will be zeroed out, costing taxpayers $14 billion.

Borrowers who took out loans to participate in "low-financial-value programs" will see their outstanding account balances drop to zero. The CRFB estimates that it will cost $35 billion.

The administration will cancel debt from Federal Family Education Loans, costing another $17 billion.

Individuals "facing hardships" or likely to go into default will also be relieved of their debt. The CRFB estimated that this could cost anywhere from $100 billion to $600 billion.

"The Department of Education has estimated the first four components of the plan would cost $147 billion over a decade, with half the cost stemming from the cancellation of accumulated interest," the report stated.

The CRFB noted that the cancellation for hardships is "by far the most unclear and potentially the most costly part" of the administration's proposal, noting that it "could be both wide-ranging and ongoing."

The Biden administration has not clearly defined what constitutes an eligible hardship but mentions more than a dozen possible criteria, including household income, assets, total debt, current repayment status, age, disability, and health care expenses.

"In total, our $250 billion to $750 billion estimate for the total cost of the plan would be in line with the cost of the Administration's $400 billion blanket debt cancellation, which was ruled illegal by the Supreme Court. It would be on top of more than $600 billion of debt cancellation already enacted through unilateral executive action," the report read.

The CRFB warned that the sweeping debt cancellations would "put upward pressure on inflation and interest rates by supporting stronger demand."

Eighteen states filed two separate lawsuits against the Biden administration over its SAVE plan.

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NAACP blasts Biden student loan forgiveness plan for coming up short



The NAACP lashed out at reports that President Joe Biden will forgive only $10,000 in federal student loan debt, calling the plan a "devastating political mistake" and accusing the president of violating his campaign promises.

In several tweets and a CNN op-ed, NAACP President Derrick Johnson demanded that Biden unilaterally forgive a minimum of $50,000 in student debt. He argued that black Americans hold a disproportionate amount of student debt and that debt forgiveness is a "racial and economic justice issue."

"@POTUS's decision on student debt cannot become the latest example of a policy that has left Black people, especially Black women, behind. This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020," Johnson said.

\u201c.@POTUS\u2019s decision on student debt cannot become the latest example of a policy that has left Black people, especially Black women, behind. This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.\u201d
— Derrick Johnson (@Derrick Johnson) 1661281006

Student loan debt in the United States totals $1.75 trillion, and federal loans account for 92.7% of all that debt. There are 40.3 million borrowers with federal student loans, with an average debt balance of $37,667.

On the campaign trail in 2020, Biden promised to forgive "all undergraduate tuition-related federal student debt" for college graduates earning up to $125,000. But translating that promise into reality has proven difficult for the Biden administration, which lacks authority from Congress to forgive most student debt.

Using existing federal programs, the Biden administration has canceled $32 billion of student loan debt for 1.6 million borrowers — but progressives have demanded that Biden go further and cancel all loan debt using an executive order.

The plan Biden announced Wednesday will cancel $20,000 in student debt for those with Pell Grants and $10,000 for those who didn't receive Pell Grants who earn less than $125,000. It will also extend the moratorium on student loan repayment, at a total cost of roughly $300 billion, according to the Penn Wharton Budget Model.

\u201cIn keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.\n\nI'll have more details this afternoon.\u201d
— President Biden (@President Biden) 1661355129

Left-wing critics like Johnson say Biden's plan does not go far enough.

"We are fed up. The NAACP has been calling for a minimum of $50,000 in student loan debt cancellation because our research indicates it is what is necessary to make a meaningful difference. The goal should be to see the most amount of relief for the highest number of borrowers," Johnson wrote for CNN. "Even so, President Biden has indicated that he is not considering a $50,000 debt reduction. But canceling just $10,000 in debt would be bad public policy and a devastating political mistake."

And on the other side, conservatives say Biden lacks the authority to forgive student loans without an explicit act of Congress and that even if he could, he shouldn't, because people who did not borrow more than they could afford will be punished for their responsibility.

Economists say loan forgiveness creates a moral hazard by signaling to borrowers that they don't need to pay off their debt because the federal government will bail them out.

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Biden extends pause on federal student loan repayments after progressive backlash



The White House announced Wednesday that the pause on federal student loan repayment will be extended for another 90 days, following fierce backlash from progressives after the Biden administration said the moratorium would end in February.

"Today my Administration is extending the pause on federal student loan repayments for an additional 90 days — through May 1, 2022 — as we manage the ongoing pandemic and further strengthen our economic recovery," President Joe Biden said in a statement released by the White House.

The pause on federal student loan payments was among Biden's first acts on day one of his presidency. The president extended the pause once previously in August, affecting an estimated 41 million Americans who have student loans to pay back.

"We know that millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments," Biden said.

The president urged student loan borrowers to prepare to begin making payments on their debt again once the extension expires on May 1, 2022.

"Take full advantage of the Department of Education’s resources to help you prepare for payments to resume; look at options to lower your payments through income-based repayment plans; explore public service loan forgiveness; and make sure you are vaccinated and boosted when eligible," Biden said.

The president's announcement is a swift reversal from the position the White House took a little over a week ago, when press secretary Jen Psaki said loan payments would resume on Feb. 1, 2022.

Progressive activists and politicians stormed social media with outraged posts, accusing Biden of breaking his promise to relieve student loan debt.

Multiple Democratic lawmakers, including Senate Majority Leader Chuck Schumer (D-N.Y.), have previously called on Biden to take executive action to cancel as much as $50,000 in federal student loan debt for each borrower.

In a statement, Democrats applauded Biden's action but insisted that he do more.

"We’re pleased the Biden administration has heeded our call to extend the pause on student loan payments. As we stated in our December 8th letter, the pause on federal student loan payments, interest, and collections has improved borrowers’ economic security, allowing them to invest in their families, save for emergencies, and pay down other debt," the lawmakers said in a statement.

They continued: "Extending the pause will help millions of Americans make ends meet, especially as we overcome the Omicron variant. We continue to call on President Biden to take executive action to cancel $50,000 in student debt, which will help close the racial wealth gap for borrowers and accelerate our economic recovery."