Biden’s loan price is lower than independent estimates
President Biden’s plan to cut student loans for millions of indebted former students will cost $240 billion over the next decade, the White House insisted on Friday – a figure significantly lower than other independent estimates.
“Our estimate is that the debt relief proposal will reduce the average annual revenue of the student loan program by about $24 billion a year over the next ten years,” Bharat Ramamurti, deputy director of the National Economic Council of the White House, during a press briefing. Friday.
“That means we’re not going to collect a certain amount of payments that we otherwise would have collected that total about $24 billion a year on average over the next ten years,” he said.
The figure is the first time the White House has set a price on the effort it hopes will begin to deliver on a campaign promise before the midterm elections.
President Biden caused an uproar when he announced debt forgiveness on Wednesday – despite experts warning the bailout would worsen America’s precarious economic situation and unfairly disadvantage blue-collar workers.
Now, the attached cost – $240 billion over ten years – is oddly lower than other independent estimates.
Earlier this week, Penn Wharton’s budget model estimated that a one-time debt forgiveness program of $10,000 per borrower earning less than $125,000 a year would cost taxpayers about $300 billion, rising to 329, $7 million if the window is extended over the next 10 years.
Similarly, an assessment by the bipartisan Committee for a Responsible Federal Budget puts the cost at about $360 billion over the next decade.
The White House explained the discrepancy of some $100 billion on a ‘preliminary estimate’ that it assumes only 75% of eligible people will take advantage of the loan reduction – based on previous take-up rates for federal programs smaller scale student loan relief.
“We hope to get closer to 100% [participation] as possible,” he said. “But in order to release a preliminary estimate on that, we had to pick a number and felt 75% was the most defensible.”
A fuller – and likely higher – cost estimate is expected from the Office of Management and Budget in the coming weeks.
If the $240 billion figure turns out to be accurate, Ramamurti said it represents only 1.5% of the deficit reduction that the budget is on track for this fiscal year.
“In practice, compared to the previous year, $1.7 trillion more is going into the Treasury than it is going out,” he said. “It’s being paid for – and more – by the amount of deficit reduction that we’re already on track for this year.”
By comparison, the White House pointed to the more than $350 billion in PPP loans canceled since last July.
Still, the plan has its critics, including those from the president’s own party.
Democratic Representative Tim Ryan – who is battling for an Ohio Senate seat against Republican JD Vance – broke with his party and his own voting record this week when he said the plan sent the “wrong message “to the Americans who had decided not to. graduate and are already struggling to pay their bills.
“While there’s no doubt that a college education should be about opening up opportunity, debt forgiveness for those already on the path to financial security sends the wrong message to the millions of college-educated Ohioans. who work just as hard to make ends meet,” Ryan told the Columbus Dispatch.
Likewise, Maine Democrat Jared Golden — who is defending his House seat in a close race against former GOP Rep. Bruce Poliquin — has spoken out against the plan.
“It’s out of step with the needs and values of the American working class, and I don’t support the president’s decision,” Golden told the Bangor Daily News.
Overall — including other minor changes to student loans such as the creation of a new income-driven repayment plan and an extension of the repayment moratorium — the CRFB believes Biden’s program will erase more half a trillion dollars in debt.