WASHINGTON — President Biden’s plan to erase significant amounts of student loan debt for tens of millions of Americans could cost about $400 billion, the nonpartisan Congressional Budget Office said in a report Monday, making it one of the costliest programs in the president’s agenda.
The C.B.O. said the price tag might rise even higher because of Mr. Biden’s decision to extend a pause on federal student loan repayments through the end of the year, which could end up costing some $20 billion. The report gauged the cost over a period of 30 years, though the bulk of the effects to the economy would be felt over the next decade.
Although the office called the figures “uncertain,” they are generally in line with those that economists put forth after Mr. Biden announced the program in August. The report is certain to revive the political debate over student loan forgiveness just weeks before the midterm elections. Critics have cast the plan as a costly giveaway that could exacerbate inflation, while the administration argues that it will help millions of low- and middle-income Americans get their footing in a volatile economy.
Mr. Biden’s plan cancels $10,000 in debt for those earning less than $125,000 per year and $20,000 for those who had received Pell grants for low-income families. In its report, the C.B.O. said that of the 37 million borrowers with direct loans from the federal government, 90 percent who are eligible could be expected to take advantage of debt forgiveness once it becomes available. (White House officials have suggested that a far smaller share of eligible borrowers are likely to opt into the program than the budget office predicts, which would reduce its cost.)
In a joint statement, Senators Chuck Schumer of New York, the majority leader, and Elizabeth Warren of Massachusetts, two Democrats who pressured Mr. Biden to enact the policy, said the C.B.O. estimate “makes clear that millions of middle class Americans have more breathing room thanks to President Biden’s historic decision to cancel student debt.”
Still, critics have accused the Biden administration of hiding the plan’s true cost.
Marc Goldwein, the senior vice president for the Committee for a Responsible Federal Budget, said that the C.B.O. score did not take into account a significant part of the administration’s loan relief program: a plan to reduce payments for future borrowers who go on to earn low incomes after college, which outside analysts say could host hundreds of billions of dollars more.
“You’re basically buying a very expensive lottery ticket,” Mr. Goldwein said. “When you’re taking out the loan, you’re going to have no idea of how much you’re going to be paying back.”
Monday’s report, issued by a nonpolitical budget scorekeeper, is one of several attempts to estimate the total cost of the program, which Mr. Biden enacted using executive action rather than legislation. The Committee for a Responsible Federal Budget calculates the cost at somewhere between $440 billion and $600 billion over a decade. The University of Pennsylvania’s Penn Wharton Budget Model estimates just over $600 billion over 10 years. The White House has not yet released its own estimate, but officials say it should be available in the coming weeks.
Administration officials have tried to portray the potential costs as much lower than outside groups’ estimates, asserting that debt cancellation is “paid for” by higher-than-expected tax revenues this year — an explanation that defies traditional budget accounting conventions.
“Under the president’s leadership, we are on track to reduce the deficit by over $1 trillion this year,” a White House spokesman, Abdullah Hasan, said in a statement defending the cancellation plan on Monday.
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But the budget deficit is coming down not only because of increased tax revenue. The government also borrowed trillions more than usual last year to pay for a $1.9 trillion stimulus package aimed at helping people, businesses and government endure the pandemic — and then did not do a similar round of borrowing this year. Administration officials are effectively arguing that they are paying for student loan relief in part by not borrowing more money for pandemic aid.
In a call with reporters on Monday held shortly after the C.B.O. score was released, administration officials called the estimate “highly uncertain.” In an effort to put the top-line figure into rosier context, the officials pointed out that the administration’s plan would reduce the amount repaid to the Treasury by about $21 billion, or 0.08 percent of the gross domestic product, in 2023, an amount reflected in the C.B.O. report.
The budget office uses a more conventional way of estimating the costs from policies like debt forgiveness, called a present value calculation. It estimates the cost of a plan as if it were delivered in a single windfall. It, too, called its estimates highly uncertain.
The official timing for debt relief is uncertain; the Department of Education has said it would set up an application process by the end of the year. About 60 percent of student loan borrowers have received Pell grants, and a majority come from families making less than $30,000 a year. The Education Department estimated that 27 million borrowers would qualify for up to $20,000 in relief.
More on Student Loan Debt Relief
Millions of other borrowers will be eligible for $10,000 in debt relief, as long as they earn less than $125,000 a year or are in households earning less than $250,000. Borrowers will be assessed based on the income they reported in 2021 or 2020.
Supporters of the measure have argued that Black and Hispanic Americans could benefit the most from the initiative. An analysis released by the Census Bureau last week estimated that some of the largest debt reductions would be among Hispanics with an associate degree, and that Black and Hispanic women would see some of the largest reductions overall.
“We don’t agree with all of C.B.O.’s assumptions that underlie this analysis, but it is clear the pandemic payment pause and student debt cancellation are policies that demonstrate how government can and should invest in working people, not the wealthy and billionaire corporations,” the statement from Mr. Schumer and Ms. Warren said.
Republicans quickly pounced on the report, pointing out that taxpayers who never took out federal student loans would have to help make up the difference.
“Every American should be outraged by the president’s cynical ploy and by the real cost it places on those who stand to benefit the least,” said Senator Richard M. Burr of North Carolina, the top Republican on the Senate committee that focuses on health and education and a lawmaker to whom the C.B.O. report was addressed.
The White House indicated on Monday that it would push forward with its plan despite the response from conservative critics. Officials in several states, including Arizona, have threatened to launch legal challenges.
Karine Jean-Pierre, the White House press secretary, told reporters that the criticism amounted to “noise” and said that Americans who are eligible should be able to apply for forgiveness “very soon.”
Emily Cochrane contributed reporting from Washington.