The Biden administration is pushing back on a new estimate from the Congressional Budget Office released Monday, which said that President Joe Biden’s plan to cancel up to $20,000 in student debt for millions of Americans will cost $400 billion over the next decade.

What You Need To Know

  • The Biden administration is pushing back on a new estimate from the Congressional Budget Office, which estimates that President Biden's student debt cancellation plan will cost $400 billion over the next decade

  • The White House contends that President Biden’s executive action will provide “breathing room to tens of millions of working families" and they are on track to reduce the federal deficit this year

  • The news comes as libertarian group in California filed a lawsuit against Biden's student debt forgiveness plan, calling it an illegal overreach

  • A separate statement from the White House called the lawsuit “baseless,” saying opponents “are trying anything they can to stop this program that will provide needed relief to working families"

The letter — a response to an inquiry from two North Carolina Republicans, Rep. Virginia Foxx and Sen. Richard Burr — also said that pausing payments through the end of the year will come at an additional cost of $20 million. 

Foxx contended that the estimate demonstrates that the Biden administration “has lost all sense of fiscal responsibility.”

“Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt,” said Foxx, the top Republican on the House Education Committee.

But the Biden administration has pushed back on this assertion, saying that they are still on track to reduce the federal deficit this year. 

At an event Tuesday celebrating lowered health care costs from the Inflation Reduction Act, President Joe Biden said that "even with some student loan forgiveness and all the costs of all these things, we're still on track to reduce the deficit this Fiscal Year by more than $1 trillion."

The White House contends that President Biden’s executive action will provide “breathing room to tens of millions of working families,” allowing them to have an easier time paying their bills, start a business, or even buy their first home — and compared Biden’s action to the 2017 tax cuts enacted by his predecessor, former President Donald Trump, and Congressional Republicans.

“It's a stark contrast to the Trump tax bill, which ballooned the deficit by nearly $2 trillion and provided the vast majority of benefits to big corporations and the wealthiest individuals,” said White House spokesperson Abdullah Hasan in a statement.

Senate Majority Leader Chuck Schumer and Sen. Elizabeth Warren, D-Mass., two of the biggest proponents in the Democratic caucus for student debt cancellation, pushed back on the CBO's estimate in a statement of their own.

"In contrast to President Trump and Republicans who gave giant corporations $2 trillion in tax breaks, President Biden delivered transformative middle class relief by cancelling student debt for working people who need it most — nearly 90% of relief dollars will go to those earning less than $75,000 a year," the Democratic lawmakers wrote. "We don’t agree with all of CBO’s assumptions that underlie this analysis, but it is clear the pandemic payment pause and student debt cancellation are policies that demonstrate how government can and should invest in working people, not the wealthy and billionaire corporations."

The news comes as libertarian group in California filed a lawsuit against Biden's student debt forgiveness plan, calling it an illegal overreach that would increase state tax burdens for some Americans who get their debt forgiven.

“Congress did not authorize the executive branch to unilaterally cancel student debt,” said Caleb Kruckenberg, an attorney at the Pacific Legal Foundation. He said it’s illegal for the executive branch to create the policy “by press release, and without statutory authority.”

The suit’s plaintiff is Frank Garrison, described as a public interest attorney who lives in Indiana and is employed by the libertarian group.

Garrison is on track to get his student debt erased through a separate federal program for public servants. Although most borrowers will need to apply for Biden’s plan, Garrison and many others in that program will automatically get the relief because the Education Department has their income information on file.

Biden’s plan would automatically cancel up to $20,000 of Garrison’s debt, which in turn would trigger an “immediate tax liability” from the state of Indiana, according to the suit. Under the debt forgiveness program he’s enrolled in now, canceled debt cannot be taxed.

“Mr. Garrison and millions of others similarly situated in the six relevant states will receive no additional benefit from the cancellation — just a one-time additional penalty,” the suit argues.

Any student debt forgiven under Biden’s plan would also be subject to state taxes in Arkansas, California, Minnesota, Mississippi, North Carolina and Wisconsin, unless lawmakers in those states change their current laws.

When asked about the suit, White House press secretary Karine Jean-Pierre said anyone will be able to opt out of the cancellation. 

"When it comes to student loan debt relief, this is a promise that the president made on the campaign trail," Jean-Pierre said Tuesday. "And this is an opportunity that the president saw to give Americans, American families out there a little bit of a breathing room you hear him say that often."

"When you look at the student loan relief program, it is going to help tens of millions of people," she said. "It is going to help, and 90% of folks who are on that program are making under $75,000 a year."

"We want to want to be really clear here, you know, opponents of the Biden-Harris administration student loan plan are trying to stop it because they know it will provide much needed again relief for working families," Jean-Pierre said, adding: "The bottom line is this — no one who does not want debt relief will have to get that debt relief."

A separate statement from the White House called the lawsuit “baseless,” saying opponents “are trying anything they can to stop this program that will provide needed relief to working families.”

Conservative groups have been threatening to challenge debt cancellation since Biden first aired the idea, saying it’s legally questionable and unfairly cancels student debt at the expense of Americans who didn’t attend college. One of the main challenges has been finding someone who faces personal harm as a result of Biden’s plan, giving them legal standing to sue.

The Biden administration has repeatedly argued that the plan is on solid legal ground.

In its legal justification for debt cancellation, the Biden administration invoked the HEROES Act of 2003, which aimed to provide help to members of the military. The law gives the administration “sweeping authority” to reduce or eliminate student debt during a national emergency, the Justice Department said in an August legal opinion.

Education Secretary Miguel Cardona has said he has the legal authority to cancel debt for people who faced hardship during the pandemic. Cardona says Biden’s plan will ensure borrowers aren’t worse off after the pandemic than they were before.