By Katie Lobosco, CNN
President Joe Biden’s plan to cancel up to $20,000 in federal student loan debt for low- and middle-income borrowers could cost $400 billion, according to a Congressional Budget Office report released Monday.
Biden announced the forgiveness plan in August, after facing mounting pressure from progressives to broadly cancel some student loan debt.
The Department of Education plans to release an application for the program in October. No student debt has been canceled yet.
The CBO, which conducts nonpartisan analysis for Congress, warned in the report that the estimates are “highly uncertain.”
The estimate relies on a number of assumptions, including how many eligible borrowers will apply, as well as what portion of the outstanding federal student loan debt may not have been repaid anyway over the lifetime of the loans due to other existing forgiveness programs, for example. Those projections depend in part on future economic conditions, the CBO said.
The White House is expected to release its own estimate of Biden’s student loan forgiveness plan in the coming weeks. The administration previously said the plan would reduce cash flow by about $24 billion a year.
Under Biden’s plan, individual borrowers who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years will see up to $10,000 of their federal student loan debt forgiven.
If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness. Pell grants are awarded to millions of low-income students each year, based on factors including their family’s size and income and the cost charged by their college. These borrowers are also more likely to struggle to repay their student debt and end up in default.
This story has been updated with additional information.
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