(The Center Square) – President Joe Biden announced Wednesday his administration would “forgive” $10,000 in federal student loan debt for those making less than $125,000 per year. The Committee for a Responsible Federal Budget said the plan could cost taxpayers more than $200 billion.
The total income cap is expected to be higher for married couples, likely around double the $125,000 mark, though that has not been confirmed.
For Pell Grant recipients, the debt reduction will total $20,000. The plan will also allow borrowers to cap repayment of their loans at 5% of their income, and it extends student loan repayment “one final time” through Dec. 31 of this year, according to the White House.
“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle-class families breathing room as they prepare to resume federal student loan payments in January 2023,” Biden said in a statement.
The decision comes after months of warning of the budgetary impacts of increased inflation and federal debt from the decision.
“Simply extending the current repayment pause through the end of the year would cost $20 billion – equivalent to the total deficit reduction from the first six years of the IRA, by our rough estimates,” the Committee for a Responsible Federal Budget said in a statement. “Cancelling $10,000 per person of student debt for households making below $300,000 a year would cost roughly $230 billion. Combined, these policies would consume nearly ten years of deficit reduction from the Inflation Reduction Act.”
Virginia Republicans seeking seats in Congress were quick to condemn the move, saying hard-working citizens will pay higher taxes to shoulder the burden for those who will not pay back their student loans.
“President Biden is giving a taxpayer-funded government handout during an election year to bribe voters in the midterms,” Yesli Vega, whose running for Virginia’s 7th Congressional District in eastern Prince William County and Stafford County, told Potomac Local News. “The hardworking Americans who could not or chose not to attend college will now foot the bill for the most wealthy among us who hold a majority of the debt.”
“After my family fled Vietnam, my mother would always tell us that education is the one thing that can never be taken away from us,” said Hung Cao, a Republican running for the 10th Congressional seat in Manassas and Loudoun County. “Today the price of higher education in America has grown astronomically, and Biden’s forgiveness plan does absolutely nothing to address the rising costs of college. This will only encourage more borrowing by future generations, and universities will charge even more.”
Democrats Abigail Spanberger and Jennifer Wexton, the respective congressional incumbents, did not return Potomac Local News’ request for comment.
Today’s debt forgiveness costs taxpayers between $300 billion and $980 billion over 10 years. It comes two weeks after Democrats passed the Inflation Reduction Act, which included $79 billion to hire and train 87,000 new IRS agents.
A CNBC/Momentive survey released earlier this week reported that 59% of those surveyed said they are concerned forgiving student debt will hike inflation. As the Center Square previously reported, Harvard Professor and former Chair of President Barack Obama’s Council of Economic Advisors Jason Furman argued that forgiving student debt “benefits recent college grads and hurts most everyone else, both rich and poor.”
“Student loan relief is not free,” Furman wrote on Twitter. “It would be paid for. Part of it would be paid for by the 87% of Americans who do not benefit but lose out from inflation. Part of it would be paid for by future spending cuts [and] tax increases – with uncertainty about who will bear those costs.”
Critics pointed out that Democrats have repeatedly said Biden does not have the authority to forgive the loans.
“People think that the president of the United States has the power for [student loan] debt forgiveness,” House Speaker Nancy Pelosi, D-Calif., said in April. “He does not.”
Potomac Local News contributed to this report.
