Taxpayers will be on the hook for nearly $400 billion to cover President Biden’s student debt write-off, according to a nonpartisan analysis.
The National Taxpayers Union Foundation estimates that the added burden from the program averages out to $2,500 per taxpayer when accounting for government spending cuts, higher interest rates and future tax hikes.
Although taxes will not increase immediately, the group said, taxpayers will have to cover the cost after Mr. Biden’s debt cancellation goes into effect.
“More government debt means higher interest payments on the nation’s new and existing debts, crowding out private investment,” said Andrew Lautz, director of federal policy for the National Taxpayers Union. “NTUF believes that taxpayers are ultimately responsible for paying down the national debt either through government spending cuts or higher taxes in the future.
“But no one’s taxes will immediately increase due to this executive action,” he added.
Mr. Biden announced his long-awaited student debt forgiveness plan last week. It included canceling $10,000 in student debt for borrowers who earn less than $125,000 per year and $20,000 in debt for those who received Pell Grants.
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The president extended the COVID-19 pause on federal student loan payments through December. He also lowered monthly payments on outstanding undergraduate loans from 10% to 5% of discretionary income. The plan will forgive loan balances after 10 years of payments instead of 20 years for original loan balances of $12,000 or less.
The approximately $400 billion top-line cost of the program estimated by the foundation is in line with other outside estimates.
The nonpartisan Committee for a Responsible Federal Budget estimates that Mr. Biden‘s plan will cost the U.S. Treasury $440 billion to $600 billion. A separate analysis projected that the plan would boost inflation by 0.15% to 0.27% over the next year.
A Penn-Wharton Budget Model estimates that the plan will cost up to $605 billion and could balloon to more than $1 trillion when accounting for potential behavioral changes.
The White House’s preliminary estimate pegged the cost at $240 billion, far below outside estimates.