1) U.S. Department of Education Estimate: Biden-Harris Student Debt Relief to Cost an Average of $30 Billion Annually Over Next Decade
The Department estimates that, over the next 10 years, the program will cost on average $30 billion annually. The ten-year cost in terms of reduced cash flows into the government will be roughly $305 billion.
2) CBO: Costs of Suspending Student Loan Payments and Canceling Debt (9.26.22)
CBO estimates that the cost of outstanding student loans to the federal government will increase by about $400 billion because of an executive action canceling some debt.
3) NY Fed: Revisiting Federal Student Loan Forgiveness: An Update Based on the White House Plan (9.27.22)
In this post, we update our framework to consider the White House plan now that parameters are known, with estimates for the total amount of forgiven loans and the distribution of who holds federal student loans before and after the proposed debt jubilee.
We estimate that the plan will cancel roughly $441 billion in federal student loans which would eliminate federally-held balances for 40.5 percent of federal borrowers, forgiving 31.1 percent of the total outstanding federal student loan balance. In our estimation, 5.1 percent of borrowers will be ineligible for forgiveness due to the income threshold. Distributionally, we find that the plan, particularly because of the additional forgiveness for Pell grant recipients, pushes more forgiveness dollars toward borrowers living in lower- and middle-income neighborhoods than borrowers living in higher-income communities. By our count, 65 percent of federal student loans are held by borrowers living in neighborhoods with median household income below $83,000, and borrowers in these neighborhoods receive 72 percent of proposed loan forgiveness. Student loan borrowers residing in lower- and middle-income neighborhoods are more likely to have delinquent or defaulted balances and are more likely to have their loans completely forgiven by the plan. Overall, we find that the White House plan directs modestly higher average forgiveness amounts to lower- and middle-income areas. Because these borrowers have higher delinquency rates and balances that are larger relative to their incomes, forgiveness will have a more substantial impact on lower-income student loan borrowers.
4) CRS: The Biden Administration’s Newly Announced Student Loan Debt Cancellation Policy