White House draws ridicule for student debt spin

A Congressional Budget Office estimate holds that Biden’s plan will cost taxpayers roughly $400 billion. The White House issued a memo arguing the true number could be much lower, but both conservatives and nonpartisan think tanks disagree.

LAWSUITS MOUNT ON BIDEN’S EXPENSIVE STUDENT LOAN FORGIVENESS PLAN

“Regardless of whether it’s $250 billion, $400 billion, or higher, the point I’d like to make is it’s a big number,” said Bill Hoagland, senior vice president of the Bipartisan Policy Center. “It will more than swamp anything that was in the Inflation Reduction Act in terms of deficit reduction over the next 10 years.”

Last month, the Biden administration announced it was forgiving $20,000 in student loans for every borrower with an annual income below $125,000 who had received a Pell Grant in their financial aid package. All other borrowers in the income bracket are eligible for $10,000 in loan forgiveness.

For its estimate, the CBO approximated that 95% of student loan borrowers were eligible for some forgiveness, and 65% were eligible for the full $20,000 cancellation. Of those eligible, the CBO estimated that 90% would apply for loan forgiveness and 45% of borrowers would have their entire outstanding balance eliminated, arriving at a final estimate of $400 billion.

In its analysis, the CBO did not account for the administration’s changes to the income-driven repayment program, which lower borrowers’ monthly payment requirements based on their income and potentially drive the true cost far higher.

The White House did not address this either but took issue with other aspects of the analysis in a memo titled “Translating CBO for Non-Budget Wonks.”

“The Congressional Budget Office (CBO) released earlier today an estimate — not a score of the administration’s student debt relief plan,” it reads. “CBO called its own estimate ‘highly uncertain.’ We agree.”

The memo argues that less than 90% of borrowers will actually file to have their loans forgiven, saying only 50% of those eligible for previous debt discharges took advantage. It also holds that the cost will not exceed $400 billion even over a 10-year period and will cost only $21 billion in 2023. The final figure, according to the memo, could be closer to $250 billion over 10 years.

Hoagland agrees that the CBO estimate is highly uncertain — but says that uncertainty runs both ways.

“They didn’t include anything with regard to income-driven repayments,” he said, noting that aspect of the program could add another $150 billion to the total. “Let’s be honest. There are no free lunches here. This is a major decision from a budgeteer’s perspective that will have ramifications for all kinds of loans in the federal government.”

BIDEN’S NEXT STUDENT LOANS MOVE COULD PLACE BILLIONS MORE IN DEBT ON TAXPAYERS

Hoagland also thinks the participation rate will be 90% or even higher, given the high profile of the program and the fact that participants stand to receive thousands of dollars.

Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, estimates the loan transfer could cost between $500 billion and $650 billion with income-driven repayment included.

“The White House put out probably the most expensive set of executive actions in history, released no cost estimate, and now is running from independent cost estimates,” he said. “They don’t have a plan to pay for it, and they’re doing this by executive fiat.”

Goldwein also took issue with the idea that take-up rates will be low, saying this would undermine the goal of the program.

“I’m not sure that’s the argument they want to be making — ‘our awesome program won’t really have a high take-up,'” he said. “If participation is bad, guess who is not participating? It’s people who are lower income and less educated. The program would be much more regressive in that case.”

The shaky budget estimate is the Biden administration’s latest in a string of questionable financial claims.

It drew criticism in August for claiming a bill that showered $80 billion on the IRS to hire 87,000 new employees wouldn’t increase the audit rate for most taxpayers.

Biden officials and the president himself claimed there was “0% inflation” in July, a technically true but highly misleading statement, and in August, the president claimed inflation rose “just an inch, hardly at all.” The year-over-year inflation rate was 8.5% in July and 8.3% in August.

Earlier in July, administration officials quarreled with the meaning of the word “recession,” saying that two consecutive quarters of negative gross domestic product growth is not the technical definition.

“The Biden Administration has a tortured relationship with math,” Rep. Virginia Foxx (R-NC) joked on Twitter.

Foxx weighed in again to criticize the CBO estimate for Biden’s student loan transfer.

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In a statement, she blasted the president, saying the White House had “lost all sense of fiscal responsibility” and the estimate was “just the tip of the iceberg” because it did not incorporate “this administration’s other efforts to transfer wealth from college graduates to hardworking taxpayers who never set foot on a college campus.”

“Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt,” Foxx said.