With Joe Biden planning to cancel up to $20,000 in student loans per person, it will cost average taxpayers an average of over $2,5000 yearly, as per the National Taxpayers Union Foundation.
As per estimates of the National Taxpayers Union Foundation, the planned debt cancellation may cost anywhere between $386 billion and $405 billion in net costs to taxpayers. This comes up to an average of $2,504.22 per taxpayer yearly.
Others have estimated a higher price tag. According to the Committee for a Responsible Federal Budget, Biden’s plan would cost around $500 billion. Meanwhile, the libertarian Cato Institute put out an estimate of $427 billion.
The National Taxpayers Union Foundation said: “Accounting for the uneven distribution of tax burdens across different income levels, we estimate that low-income taxpayers making between $1 and $50,000 would bear an average burden of $190, while taxpayers making between $100,000 and $200,000 would bear an average burden of $3,790.”
Even though it’s called debt forgiveness, the president’s plan can be more accurately called a debt transfer program. The student loans planned to be forgiven are loans owed to the federal government. Therefore, the revenue lost from the said loans will be made up for by borrowing by the federal government.
“While taxpayers won’t feel that bite on this year’s tax bill, Congress will have to make up the difference through reduced spending elsewhere, higher taxes, or, most likely, increased borrowing. Assuming the latter, the federal government essentially just took out a $2,500 loan on the average taxpayer’s behalf, one that taxpayers will be paying interest on for some time,” Andrew Wilford National Taxpayers Union Foundation policy analyst wrote in an op-ed published recently.
In the end, the cost to taxpayers may be higher since the loan cancelation does nothing to answer the underlying problems that have led to this point. As per the Committee for a Responsible Federal Budget, the total level of student debt is projected to return to pre-cancelation levels by 2028. This timeline could be shorter if students borrow more because of expected future forgiveness.