Biden's student loan forgiveness plan could cost $400 billion

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Photo credit Andrii Dodonov/Getty Images

One question still looming over President Joe Biden's plan to forgive $10,000 in federal student debt for most borrowers is precisely how much the initiative will cost.

The Congressional Budget Office shared on Monday that it estimates the plan will cost the government $400 billion over 10 years.

The $400 billion estimate comes as "a result of the action canceling up to $10,000 of debt issued on or before June 30, 2022," according to the office.

The plan will not see every borrower receive the forgiveness, as restrictions around income are in place. However, in addition to the $10,000, there will also be an additional $10,000 forgiven for those who have received pell grants.

Biden's plan also extended the current pause in student loan repayments to the end of 2022. The CBO estimated that the action would also cost $20 billion.

Currently, there are 43 million borrowers holding $1.6 trillion in federal student loans, and now $430 billion of that debt will be wiped clean, the CBO shared.

Maya MacGuineas, the President of the Committee for a Responsible Federal Budget, which advocates for lower deficits, shared with NBC News that this could be the most costly executive action ever given by a president.

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"As CBO's estimates help confirm, the President's student debt plan would wipe out the ten-year savings from the Inflation Reduction Act twice over, worsen inflationary pressures, and deliver benefits to millions of Americans with advanced degrees in upper-income households," MacGuineas said. "This might be the most costly executive action in history. It's unacceptable that the President would implement it without offsets and without Congressional approval."

Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-Mass.) called the action "transformative" in a joint statement issued on Monday.

"Today's CBO estimate makes clear that millions of middle-class Americans have more breathing room thanks to President Biden's historic decision to cancel student debt," they said.

But their Republican counterparts, like Rep. Virginia Foxx (R-N.C.), called the estimates costly, saying it only transfers wealth from the working class to those who went to college.

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"CBO's $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility," Foxx, the Republican leader on the House Education and Labor Committee, said in a statement Monday.

Biden's plan is set to begin rolling out applications for loan forgiveness next month. After loan borrowers apply, the forgiveness is expected to take four to six weeks to be applied.

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Featured Image Photo Credit: Andrii Dodonov/Getty Images