President Biden and White House officials have remained silent on how they intend to fund the cancellation of up to $20,000 in student debt for millions of Americans.
Despite the fact that the policy was announced last week, administration officials have yet to explain how Biden’s student loan giveaway will be paid for in the long run. Economists believe that because the proposal calls for the government to forgive the loans outright, taxpayers will be on the hook as the principle and interest are added to the nearly $31 trillion in existing U.S. debt.
Last week, Biden announced plans to forgive $10,000 in student debt for borrowers earning less than $125,000 per year. Pell Grant recipients will receive $20,000 in debt relief if their income is less than $125,000. According to administration officials, the decision will benefit no one in the top 5% of earners.
The White House has also extended a moratorium on student loan payments until the end of the year. Concurrent with the announcement is a new Education Department proposal that would allow borrowers to cap undergraduate loan repayment at 5% of their monthly income, increasing the cost of the handout to taxpayers.
According to administration officials, the cost of Biden’s student loan giveaway cannot be fully accounted for because it is unknown how many borrowers will take advantage of the opportunity. They claim that it is unclear how many people would have paid off their loans in full over time anyway.
However, the National Taxpayers Union Foundation disagrees. Earlier this week, the group released an analysis estimating that the student loan handout will add nearly $330 billion to the deficit over the next decade. According to a budget model developed by the University of Pennsylvania’s Wharton School of Business, the average cost per taxpayer will be $2,085.
However, that could be on the low end. The cost of the handouts is estimated to be between $440 billion and $600 billion by the Committee for a Responsible Budget.