White House downplays CBO report on $400 billion cost of student loan forgiveness plan
The White House on Monday pushed back on a report by the Congressional Budget Office (CBO) released earlier that day, arguing that 90 percent of federal student loan borrowers are unlikely to take advantage of President Biden’s forgiveness plan.
The CBO reported that the plan to forgive $10,000 in federal student loan debt for borrowers earning under $125,000 and $20,000 for borrowers who received Pell Grants will cost about $400 billion. It also projected that 90 percent of income-eligible borrowers will apply for debt cancellation.
“CBO called its own estimate ‘highly uncertain.’ We agree,” the White House said in a memo. “CBO assumes that 90% of eligible borrowers take the necessary steps to claim relief. We would be thrilled if 90% of eligible middle- and low-income Americans applied for this program. But unfortunately, that’s unlikely based on the data from other programs.”
The White House in its memo argued that the 90 percent mark is not likely because previous debt relief programs to discharge borrowers whose schools closed, including ITT Technical institute and Corinthian College, had takeup rate of less than 50 percent.
Also, it called Social Security and Medicare outliers, and although they have 90 percent takeup rates, they are for older Americans and “extraordinarily broadly popular.”
The White House said that the cost is not $400 billion “this year, next year, or even over ten years.”
“While the CBO estimate is meant to reflect the full effects over the entire lifespan of the program, the annual cash flow effects— which is what matters for the federal debt and for economic impacts—are much smaller. All estimates of the Administration’s plan will face this same challenge,” the White House said in its memo.
The administration did note that its estimate aligns with the CBO estimate that in 2023, the impact of loan forgiveness will be about $21 billion. The White House had estimated $24 billion in 2023.
Biden released the student loan forgiveness plan last month and has argued that it is economically responsible and will be paid for.
The president has been under fire since releasing the plan from Republicans who have criticized it for being too expensive and for costing taxpayers. Additionally, moderate Democrats, especially those in swing districts, have raised concerns that it will add to the inflation rate that is already at a 40-year high.