The White House on Friday said the student loan forgiveness program introduced by President Biden this week will cost roughly $24 billion a year over the next 10 years.
That’s far less than what independent researchers say the plan could cost. The Committee for a Responsible Federal Budget put the estimated cost at $500 million, and the University of Pennsylvania’s Wharton School of Business said the total price tag of the plan could top $1 trillion.
The Wednesday announcement that Americans who earn $125,000 a year or less could see a reduction in student loan payments was met with pushback from members of the GOP and questions over how much the program could cost not only the government but taxpayers.
“Let’s put that $24 billion in context,” Deputy Director of the National Economic Policy Bharat Ramamurti told reporters from the White House on Friday. “That represents 1.5 percent of the deficit reduction that we are projecting for this fiscal year before the announcement.”
Ramamurti said the Biden administration considers the loan relief already “fully paid for” since the U.S. is on track to see a $1.7 trillion reduction in the U.S. deficit.
“It is paid for, and far more, by the amount of deficit reduction that we’re already on track for this year,” he said. “Practically speaking, compared to the previous year, 1.7 trillion more dollars are coming into the treasury than are going out.
“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 added.
The White House extended the pandemic-era student loan repayment freeze through the end of the year.
But Ramamurti said that the federal government is still seeing some $2 billion a month come in from Americans who chose to continue paying down their loans.
After the freeze is lifted in January 2023, another $4 billion a month is expected to start coming in.
The administration this week championed that revenue growth following the pandemic has increased to the extent that the U.S. will see the “single largest nominal decline in the federal deficit in American history” this year.
The White House’s projections of how much the program will cost is significantly lower than what other organization and members of Congress have estimated.
Reporters on Friday pointed out that the new student loan forgiveness program will lower the U.S.’s deficit reduction milestone.
To which Ramamurti said, “That’s a fair way of thinking about it. Another way of thinking about it is that we go from the single largest deficit reduction in the history of this country to the single largest deficit reduction in the history of this country.”
The application to apply for student loan relief will be made available in early October.
The White House said that in the meantime, loan borrowers can visit studentaid.gov and sign up to be notified when applications will become accessible.
Once the application is completed, loan relief will be granted within a four-to-six-week window.
The administration recommends completing the application by mid-November to ensure that relief is granted by the new year.