Including the Biden Administration’s new student debt cancellation plan, we estimate all recent student debt cancellation policies will cost a combined $870 billion to $1.4 trillion. That’s more than all federal spending on higher education over the nation’s entire history. The vast majority of this debt cancellation was put in place through executive actions under President Biden.
$620 billion of debt cancellation has already been implemented, including $275 billion from President Biden’s new Income-Driven Repayment (IDR) program known as SAVE, $195 billion from cancelling interest as part of nearly 41 months of repayment pauses since March of 2020, and roughly $150 billion from a variety of more targeted actions such as discharging debt for those who attended closing schools and making it easier to cancel debt under existing loan forgiveness programs. The President’s newest debt cancellation scheme could cost an additional $250 to $750 billion based on our preliminary estimates.
Our numbers differ somewhat from our previous estimates, mainly because the President’s plan to cancel $10,000 to $20,000 of student debt per person was ruled illegal by the Supreme Court and the cost of his newest plan remains uncertain.
To put $870 billion to $1.4 trillion in context, this range suggests the cost of recent debt cancellation is likely higher than:
- All historic spending on higher education prior to the COVID-19 pandemic ($744 billion from 1962 to 2019)
- All projected education appropriations over the next decade ($935 billion from 2025-2034)
- The federal cost of offering universal pre-K and universal affordable child care ($750 billion)
- The cost of tripling the Pell Grant program ($675 billion)
As we’ve explained before, most of these student debt cancellation policies have not only been costly, but also inflationary, poorly targeted, counter to the mission of lowering college costs, and not financially justified.
Instead of continuing down this road, lawmakers should work together on reforms that actually fix the student loan program and address the cost and quality of higher education.
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