Biden's student-loan debt forgiveness would cost $300 billion, report says — less than half of the defense budget
- The Biden administration is reportedly gearing up to cancel $10,000 in student debt for some borrowers.
- The announcement, targeted at borrowers making under $125,000, could come on Wednesday.
After over a year of uncertainty, the Biden administration is gearing up to finally cancel some student loan debt, a long-awaited fulfillment of one of the president's campaign promises.
Borrowers making below $125,000 annually could see $10,000 in student debt wiped out as early as this week, with an announcement potentially coming on Wednesday.
In a new analysis, the Penn-Wharton Budget Model estimates that that forgiveness could cost about $300 billion this year, with a price tag of a little below $330 billion if borrowers remain eligible for forgiveness over the next ten years.
The analysis's estimates for various levels of debt forgiveness and income cutoffs show that the Biden administration has opted for the cheapest road to forgiveness; forgiving $50,000 for all borrowers would cost about $820 billion this year alone, and eventually add up to about $980 billion over the next decade if borrowers stay eligible.
Student loans currently aren't even profitable for the government. A July report from the Government Accountability Office (GAO) found that federal loans are actually projected to cost the government $197 billion, instead of bringing in what the Education Department estimated as a $114 billion profit, because of the various pauses and changes over the last couple of years.
The price of student-loan forgiveness pales in comparison to other major federal expenditures. Defense spending is projected to cost nearly $8.7 trillion over the next decade, according to the Congressional Budget Office, and will cost $796 billion in 2022 alone.
That $300 billion is also a fraction of how much borrowers hold right now; America's student loan debtors currently owe $1.7 trillion.
While Biden has not publicly confirmed his plans for broad student-loan relief, he has said himself he will make the decision before August 31, when student-loan payments are set to resume. In April, he shot down $50,000 in relief — an amount many Democratic lawmakers and advocates have been pushing for — and recent reports have suggested his final amount will be near $10,000, which he pledged on the campaign trail.
Some pundits and politicians have pushed back against forgiveness, arguing that it would exacerbate inflation and benefit the highest earners, like doctors and lawyers. Former Treasury Secretary Larry Summers, for example, recently wrote a Twitter thread saying that he hopes Biden "does not contribute to inflation macro economically by offering unreasonably generous student loan relief or micro economically by encouraging college tuition increases."
A number of Republican lawmakers have also pushed back against broad relief, citing the costs of prior policies like the payment pause, and have introduced legislation to resume repayment and ban Biden from canceling debt broadly.
But with these likely being the final days before a decision is announced, supporters of broad debt relief have been persuading the president to go as big as possible. Vermont Sen. Bernie Sanders recently called for Biden to "cancel every single cent of student debt in this country," and groups like the NAACP are keeping pressure on Biden to cancel a minimum of $50,000 for every federal borrower.
"Do it to reduce the racial wealth gap, do it to capture the interest of many who will participate in the November election, do it for the future of American families and communities," NAACP Director of Youth and College Wisdom Cole said in a statement. "Every generation will be grateful you did."