President Biden’s plan to forgive some student debt has sharply divided liberal economists and pitted the White House economic team against both independent analysts and veterans of past Democratic administrations, the New York Times reported. The areas of disagreement include how much the package of debt relief and other changes to student loans will cost taxpayers and whether the plan is “paid for” in budgetary terms. The plan’s impact on inflation, which is rising at a rapid clip, and the degree to which it will help those most in need are also matters of contention. The plan, announced last week, includes forgiving up to $10,000 in loans for individuals earning $125,000 or less and an additional $10,000 for borrowers from low-income backgrounds who received Pell Grants in college. Mr. Biden also proposed changes to loan repayment plans going forward that will reduce monthly costs and eliminate interest accumulation for potentially millions of lower-earning borrowers who maintain payments. White House officials have offered partial estimates of who will benefit most from those moves, and how much they might reduce federal revenue. The officials have made a case for why the package will not add to inflation. And they have claimed it will be “paid for,” though not in any way that budget experts agree fits that term. Conservative economists have attacked the plan, claiming that it would stoke higher inflation and burden taxpayers with hundreds of billions of dollars in new debt. Some liberal economists have defended it as a lifeline for graduates who have been harmed by the soaring costs of higher education. For starters, it’s unclear what share of eligible borrowers will go through the process to request debt cancellation from the Education Department, which has not yet set up the forgiveness program. It is also not clear how many people who apply to have their debt canceled would have paid back their full balance if Mr. Biden had not taken any action. Each of those variables could significantly affect the total cost in lost revenue. Outside groups have tried to estimate the total cost. The Committee for a Responsible Federal Budget calculates the budget impact at somewhere between $440 billion and $600 billion over a decade. The University of Pennsylvania’s Penn Wharton Budget Model estimates just over $600 billion over 10 years. The White House will not complete an official estimate of the plan’s costs until winter at the earliest, according to the White House budget office. But officials say those outside estimates are far too high. The budget office estimates that one part of the program, the debt relief of up to $20,000 per borrower, will reduce loan payments to the government by $24 billion a year over the next decade, assuming three-quarters of borrowers opt into the program.
