President Joe Biden announced on August 24 that by executive action, he would wipe out a significant amount of the debt consensually entered into by tens of millions of Americans. The White House offered a cost estimate of $24 billion a year over ten years. A recent report from the Congressional Budget Office indicates that the Biden administration’s $240 billion figure is nowhere close to the likely cost of the plan.
As of June 30, 2022, 43 million debtors held $1.6 trillion in federal student loans. Biden’s executive action would have those earning less than $125,000 per year see $10,000 of their debt canceled and Pell grant recipients see $20,000 of their debt paid down by taxpayers.
A September 26 report released by the nonpartisan Congressional Budget Office indicated that:
- 95% of the 37 million borrowers who have direct loans from the federal government meet the income criteria for eligibility;
- 65% of income-eligible borrowers are Pell grant recipients, meaning that percentage stands to receive $20,000 in debt forgiveness; and
- 90% of income-eligible borrowers are likely to take advantage of the debt forgiveness plan.