CBO: Biden's student debt forgiveness will cost more than $400 billion

CBO: Biden's student debt forgiveness will cost more than $400 billion
AP Photo/Susan Walsh

President Biden’s student debt forgiveness plan will cost an estimated $400 billion over ten years. Actually, it will be more than that because of other changes included in the executive order.

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The White House’s plan to cancel student loan debt for tens of millions of American borrowers will cost roughly $400 billion, according to a new estimate released by Congress’ nonpartisan scorekeeper.

The scorekeeper also found that the White House’s plan to temporarily extend an existing pause on student loan payments would cost roughly $20 billion…

The CBO estimate excludes the White House’s simultaneous move to lower the monthly amount borrowers can be forced to repay as a percentage of their income from 10 percent to 5 percent. That policy is set to cost an additional $120 billion, according to estimates from the Committee for a Responsible Federal Budget, a D.C.-based think tank that has opposed Biden’s policy.

So we’re probably looking at well over half a trillion dollars over ten years. The Biden administration is already attacking the CBO estimate and doubling down on plans to push this through in the fall:

The White House indicated on Monday that it would push forward with its plan despite criticism from conservative critics who have vowed to launch legal challenges. On Monday, Karine Jean-Pierre, the White House press secretary, said the criticism amounted to “noise” and said that Americans who are eligible for a key portion of President Biden’s student loan relief plan should be able to apply for forgiveness “very soon.”

In a call with reporters on Monday, administration officials called the estimate “highly uncertain.”

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Sen. Warren is also sidestepping the cost except to say she questions the CBO’s assumptions.

The CBO announcement is bringing out some of the plan’s critics.

Senate Health, Education, Labor and Pensions Committee Ranking Member Richard Burr, R-N.C., and House Education and Labor Committee Ranking Member Virginia Foxx, R-N.C., requested the analysis of the handout.

“CBO’s $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility,” Foxx said Monday. “Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt.

The exact timing of this isn’t clear but last month the White House said applications for debt forgiveness would be accepted in early October and that loan balances could be erased or reduced about a month after that. Gee, what else is happening in early November? Isn’t there an election? I’m sure that timing of this is just a coincidence.

That’s actually the dumbest part of this whole plan. It does nothing to help people who struggled to pay off their own debt prior to this year and it does nothing to help people who will be taking on new student debt in years to come. This is a one time election-year gift of public funds which is designed to boost support for Democrats in the midterms.

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It’s still not clear to me how Biden has the power to do this. The answer is that he probably does not but in order for the courts to weigh in on that someone will have to file a case first. That has apparently been in the works for a couple of weeks already.

Arizona Attorney General Mark Brnovich suggested student loan borrowers shouldn’t bank on forgiveness yet, despite President Joe Biden’s announcement last month that he’d cancel up to $20,000 for many.

“I think there’s a lot of people celebrating prematurely,” Brnovich said. “A lot of other people are very upset about this, not only because of legal arguments, but because they believe it’s fundamentally unfair.”

The state’s Republican attorney general said he and others were looking to bring a legal challenge to the president’s plan. “If we can bring a challenge, we will bring a challenge,” Brnovich told CNBC in an interview Tuesday.

Even the NY Times thinks this could very well wind up bogged down in lawsuits for some time to come.

Enacting such a major fiscal outlay through emergency executive powers has raised questions about whether Mr. Biden has the authority to carry out such a policy on his own, and many expect lawsuits and a protracted legal battle, including by those who stand to lose financially from the plan. Those who might try to claim such damages could include loan servicers who are missing out on processing fees or lawmakers who view the policy as an infringement on congressional budgetary authority…

If Republicans retake the House of Representatives next year, they could also try to sue to block the program. Representative Kevin Brady of Texas, the top Republican of the Ways and Means Committee, said this week that he believed Mr. Biden’s move was illegal.

“I don’t think it passes muster, but I worry the money will be substantially out the door,” Mr. Brady told CNBC. “I don’t know how any president gets a half a trillion dollars just by signing his signature on an executive order.”

The Biden administration issued a memo from the Department of Justice’s office of legal counsel that said that the student loan debt could be canceled under the authority of the Higher Education Relief Opportunities for Students Act of 2003. That law grants the education secretary the power to “alleviate hardship” that federal student loan borrowers are experiencing because of a national emergency, such as the pandemic. It has also been invoked to permit the Education Department to suspend student loan repayments since 2020, an action that Biden administration officials point out has not faced legal challenges.

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Didn’t President Biden just say the pandemic was over? So why would an emergency action that takes place a month or more from now make any sense?

This is probably going to wind up in the courts and there’s a real chance Biden is going to lose. I’m not sure the White House cares. What they care about is giving his base something they want prior to the coming election. He’ll get credit for doing that even if the actual relief never happens.

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