CBO says President Biden’s federal student loan forgiveness plan could cost $400 billion
DELMARVA– President Joe Biden’s federal student loan forgiveness plan is causing some concerns.
“We heard about this plan from almost from the start of the President’s Administration promise he made in the campaign I think it was pushed by progressives to announce it and potentially increase more than he wanted to, but it’s out there now and it’s subject to scrutiny from both sides,” Dr. Sam Hoff, George Washington Distinguished Professor, said.
It will forgive up to $10,000 in federal loan debt and up to $20,000 each for the 27 million American borrowers who’ve received Pell Grants.”It’s not going to be cheap and potentially would wipe out the savings that were promoted through the inflation reduction act, which be at least $300 billion and savings from the pandemic relief bill,” Dr. Hoff said.
The plan will cost $400 billion over 10 years, according to the non-partisan Congressional Budget Office, which is causing worries. “All of these are concerns for the federal deficit, which for over the last couple years has gone up significantly, and obviously when you don’t have a balanced budget then you’re adding to the federal debt itself,” Dr. Hoff said.
“The model doesn’t capture the actual loss to the federal government it would be way beyond the $400 billion some estimates show up to a trillion dollars and that’s not sustainable,” Dr. Leonard Arvi, a Salisbury University Professor of Finance, said.
Dr. Arvi said from an economic standpoint it’s the wrong timing. He claims we’re headed towards a recession and we are seeing the highest inflation in 40 years, which could be driven up by various factors. “One is increased demand, less supply, the next is excess money supply in the economy, people having more money in their wallets, being willing to spend; and on top of that, if you have the ability to, they are able to save money from student loans, which means people are going to spend for something else,” Dr. Arvi said.
Despite concerns, one financial aid counselor we spoke with said the benefits outweigh the costs.
“A lot of our students are first time students, first generation and a lot of times need additional funding, so I think it will allow them the opportunity to not only obtain their education but be successful long term with the financial flexibility,” Kiana Smith, a University of Maryland Eastern Shore Financial Aid Counselor, said. “About 60 percent, 65 percent of our students are Pell Grant recipients, so I think for not only our students, but students you know across the nation that are Pell Grant recipients, it will be a good initiative.”
Dr. Hoff said as of right now it’s not a question that this plan is going to cost money, but instead its a question of for how long. He also thinks people are still waiting for the White House to come out with their cost estimates for the plan.
