Washington
CNN

President Joe Biden’s plan to forgive 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 growing pressure from progressives to write off some student loan debt globally.

The Department of Education plans to issue an application for the program in October. No student debt has yet been cancelled.

The CBO, which conducts nonpartisan analysis for Congress, warned in the report that the estimates are “highly uncertain.”

The estimate is based on a number of assumptions, including the number of eligible borrowers who will apply, as well as the portion of outstanding federal student loan debt that may not have been repaid all way during the term of the loans due to other existing rebate programs, eg . These 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 in the first year.

Under Biden’s plan, individual borrowers who earned less than $125,000 in 2020 or 2021 and married couples or heads of households who earned less than $250,000 a year in those years will see up to $10,000 of their canceled federal student loan debt.

If an eligible borrower also received a Federal Pell Grant while enrolled in college, they are eligible for debt forgiveness of up to $20,000. Pell Grants are awarded to millions of low-income students each year, based on factors such as their family size and income and the cost charged by their college. These borrowers are also more likely to struggle to repay their student debt and to end up in default.

Top Democratic lawmakers, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have pressured Biden to forgive up to $50,000 in federal student loan debt per borrower since he entered. active. While the president’s plan will cancel less debt than expected, Democrats applauded the move.

In a joint statement released Monday, Schumer and Warren called Biden’s upcoming rescission action “transformative” for the middle class.

“Today’s CBO estimate makes it clear that millions of middle-class Americans have more breathing space thanks to President Biden’s historic decision to cancel student debt,” they said.

But Republicans have criticized Biden’s student loan forgiveness plan as a giveaway that unfairly shifts wealth from the working class to people who have gone to college.

“The CBO’s $400 billion cost estimate shows that this administration has lost all sense of fiscal responsibility,” North Carolina Rep. Virginia Foxx, Republican leader of the House Education and Labor Committee, said Monday.

Some Republican attorneys general and conservative groups are working on a legal strategy to prevent the plan from taking effect.

The CBO estimate did not take into account Biden’s proposal to streamline the income-based repayment plan, an effort to reduce monthly payments for future student loan borrowers, which could increase the total cost to the government. government.

Maya MacGuineas, chair of the independent group called the Committee for a Responsible Federal Budget, also criticized Biden’s action on student debt and said in a statement Monday that she would “twice wipe out the law’s ten-year savings.” on reducing inflation.

The Cut Inflation Act, a sweeping health care and climate bill endorsed by Biden, was passed in August.

“The Biden-Harris administration’s student debt relief plan is giving respite to tens of millions of working families,” said White House spokesman Abdullah Hasan.

“It’s a stark contrast to Trump’s tax bill, which inflated the deficit by nearly $2 trillion and delivered the vast majority of the benefits to big business and the wealthiest individuals,” he said. added.

This story has been updated with additional information.