The Biden administration’s plan to cancel student debt has come under scrutiny due to its potentially staggering cost to taxpayers. The cumulative cost of recent student loan cancellation policies is estimated to range from $870 billion to $1.4 trillion, according to a recent analysis by the Committee for a Responsible Federal Budget (CRFB), a non-partisan organization that analyzes and issues reports on fiscal policy topics. The report was spotlighted by the House Budget Committee.
This estimate includes Biden’s proposed new student debt cancellation plan, which adds $250 to $750 billion in estimated costs.
Breakdown of the Costs
- Existing Debt Cancellation: About $620 billion has already been implemented. This includes $275 billion from the new Income-Driven Repayment (IDR) program (SAVE), $195 billion from paused repayment and canceled interest during the COVID-19 pandemic, and roughly $150 billion from targeted forgiveness programs.
- New Student Debt Plan: The administration’s new proposal to cancel $10,000 to $20,000 of student debt per borrower could add an additional $250 to $750 billion to the total.
Contextualizing the Costs
The estimated costs of these debt cancellation measures exceed several key benchmarks:
- All historic federal spending on higher education before the COVID-19 pandemic, which amounted to $744 billion from 1962 to 2019.
- All projected education appropriations over the next decade, estimated at $935 billion from 2025 to 2034.
- The federal cost of implementing universal pre-K and affordable childcare, which is projected to be around $750 billion.
Impact and Controversy
Critics argue that the Biden administration’s loan forgiveness programs disproportionately benefit the minority of Americans who hold student debt, often those with higher education levels and income potential. They claim these policies unfairly transfer the financial burden to working-class taxpayers who did not attend college or took on minimal debt.
Moreover, there are concerns that such large-scale debt cancellation could lead to inflationary pressures and worsen the federal debt. The CRFB study underscores the need for a sustainable approach to addressing the cost and quality of higher education that doesn’t simply shift the financial burden without tackling the root issues
