Analysis: Full Cancellation of All Student Loan Debt Would Cost $1.6 Trillion

Student Loan Debt

The Committee for a Responsible Federal Budget has analyzed the cost of cancelling student loan debt after Joe Biden indicated he is open to the idea. It called the plan “inflationary” and bad policy.

The committee issued a press release on its estimations:

According to press reports, President Biden is seriously considering cancelling a large swath of student debt – perhaps more than the $10,000 per borrower he originally proposed during the campaign. We previously estimated that cancellation of $10,000 per borrower would cost roughly $250 billion, cancellation of $50,000 per borrower of debt would cost about $950 billion, and full cancellation would cost roughly $1.6 trillion. This cancellation would be on top of the current repayment pause and other targeted cancellation policies, which will have already cost the federal government at least $150 billion.

“Student debt cancellation may be an extremely appealing political talking point, but it is not good policy,” Maya MacGuineas, president of the committee, said. “It is costly, inflationary, poorly targeted, and fails to address the root problems in our higher education financing system.”

“Full debt cancellation would be a massive hand-out to rich doctors and lawyers, would worsen our inflation crisis, and would cost almost as much as the entire 2017 tax cuts,” MacGuineas outlined. “Even partial debt cancellation would be costly, regressive, and inflationary. Forgiving $10,000 per person of debt would cost as much as universal pre-K or a full extension of the expanded ACA [Affordable Care Act] subsidies. ”

“Either the President is serious about reducing deficits and getting inflation under control, or he is not,” MacGuineas said. “The White House can’t have it both ways. We need to be focusing on a serious and effective agenda that prioritizes sound policies, not poorly targeted political giveaways.”

CNBC was one of the media outlets who reported on Wednesday about student loan debt and speculation about what Biden will do:

The tens of millions of Americans saddled with student loans may finally hear soon what the Biden administration has decided to do, if anything, on debt forgiveness.

“Not a single person in this country has paid a dime on federal student loans since the president took office,” White House press secretary Jen Psaki said at Monday’s press briefing, referring to the suspension of interest on the debt.

She went on to say that President Joe Biden “would make a decision about any cancellation of student debt before the conclusion of that pause on student loans.”

All federal student loan debt payments have been on hold for more than two years because of the coronavirus pandemic but it the lull is set to expire on August 31.

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