White House officials are claiming that President Biden’s plan to cancel up to $20,000 per borrower in student debt is paid for because the federal deficit has dropped.
For almost a week, Biden or administration officials would not clarify how the proposal would be paid for in the long term.
Now, the White House is claiming the debt relief is “fully paid for” through already occurring deficit reduction.
Bharat Ramamurti, deputy director of the National Economic Council, said “It is paid for and far more by the amount of deficit reduction that we’re already on track for this year.”
Americans have been worried that the plan could cost taxpayers upwards of $500 billion.
“Like I said, we’re on track for $1.7 trillion in deficit reduction this year. That means, practically speaking, compared to the previous year, 1.7 trillion more dollars are coming into the Treasury than are going out,” Ramamurti added.
“And we’re using a portion of that — a very small portion of it — to provide relief to middle-class families, consistent with the president’s plan,” he continued.
Many economists have shared that they believe the Biden administration will just dump the cost on top of the nearly $726 billion federal deficit.
Officials said the cost of Biden’s plan cannot be fully accounted for yet because it is unclear how many Americans will take the opportunity and how many individuals would have paid back the full amount of their loans over time.
“All of this, as when it comes to costs, will also depend on how many of the loans canceled were actually expected to be repaid,” White House press secretary Karine Jean-Pierre said.
Biden announced last Wednesday that he plans to forgive $10,000 in student debt for borrowers making less than $125,000 annually.
Pell Grant recipients with an income below the $125,000 threshold will receive $20,000 in debt relief.
In addition to loan forgiveness, Biden decided to extend the pause on student loan payments through the end of the year.
The Education Department also announced a proposal that will allow borrowers to cap undergraduate loan repayment at 5% of their monthly income.
The National Taxpayers Union Foundation recently issued an analysis estimating that the student loan handout will add approximately $330 billion to the deficit over the next decade.
“All of this means people can start to finally crawl out from under that mountain of debt to get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business,” Biden said during his announcement of the plan.
