Canceling
federal student loans will cost the federal government hundreds of billions of dollars— and the general public will eventually end up footing the bill.
According to an
official estimate from the Congressional Budget Office, Biden’s student loan cancellation plan will cost $400 billion. However, the office notes that the estimate is “highly uncertain” based on the unknown of how many people would’ve repaid their debt had Biden not taken executive action and how much they still will repay.
Biden previously stated at a
press conference that “there is plenty of deficit reduction to pay for the programs.”
But what exactly does “cost the government” mean? Canceled federal student loans would be immediately
added to the federal deficit, which measures how much the U.S. spends minus how much it takes in.
Analysts agree that canceling federal student loans would increase the deficit. But what they’re split on is how significant that addition would be, and how the government could eventually recoup the costs.