Taxpayers will be on the hook for nearly $400 billion to cover the cost of President Biden’s student debt write-off, according to an analysis by a non-partisan analysis.
The National Taxpayers Union Foundation estimates that the added tax burden from the program averages out to $2,500 per taxpayer when accounting for government spending cuts, higher interest rates and future tax hikes to pay for the program.
The group said that, while taxes will not go up immediately once Mr. Biden’s debt cancelation goes into effect, taxpayers will eventually have to cover the cost.
“More government debt means higher interest payments on the nation’s new and existing debts, crowding out private investment,” NTUF Director of Federal Policy Andrew Lautz said. “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 unveiled 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.
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 and 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 NTUF is in line with other outside estimates.
The nonpartisan Committee for a Responsible Federal Budget estimates Mr. Biden‘s plan will cost the U.S. Treasury between $440 billion and $600 billion. A separate analysis by that group projected the plant 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 spurred by changes to the program.
The White House’s preliminary estimate pegged the cost at $240 billion, far below outside estimates.