The Biden administration's plan to cancel up to $20,000 in federal student loan debt for millions of Americans will cost the U.S. about $400 billion over a decade, according to the nonpartisan agency that conducts economic analyses of government policies.
The CBO noted that its estimates"are highly uncertain," given that they depend on the amount that borrowers would have repaid if the debt relief plan hadn't been created, as well as the amount that borrowers will repay after all or some of their loans are forgiven.
The agency's analysis doesn't break down the impact of the relief program by income group, although it said its estimate is based on an assumption that 65% of those who qualify for student loan forgiveness received at least one Pell Grant. Under the Biden administration's plan, extra relief is provided for people who received Pell Grants, which are geared to low-income students. These borrowers will receive up to $20,000 in loan forgiveness, double the amount of other borrowers.
About 95% of the roughly 37 million borrowers with direct loans from the federal government will qualify for the debt-forgiveness program, the CBO estimated. The other 5% of borrowers earn too much money to be eligible, as the plan is limited to single borrowers earning less than $125,000 a year or married borrowers earning less than $250,000.
Because Pell Grant recipients will receive double the debt relief as other borrowers, most of the program's benefits will accrue to low- and middle-income workers, according to the Penn-Wharton model.