Student debt could reach pre-cancellation levels within a decade, study shows

Student loan debt could return in less than a decade to the same level it was before President Biden canceled nearly $600 billion of debt at taxpayer expense, according to a study this week from the Committee for a Responsible Federal Budget.

Ahead of Mr. Biden’s announcement last month, there was $1.6 trillion of outstanding student loan debt. That could fall to $1.1 trillion if all eligible borrowers opt for debt forgiveness.

But the Committee for a Responsible Federal Budget, a nonpartisan fiscal responsibility advocacy group, estimates the overall student debt portfolio will return to $1.6 trillion by 2028. Adjusted for inflation, it means that student debt would return to its current level by 2031.
 
That estimate assumes there will be on change in borrower behavior, but the CRFB estimates that student loan borrowing will increase over the next decade because colleges are expected to increase tuition in response to Mr. Biden’s plan.
 
“Any behavioral changes would mean the portfolio would return to its current size even faster,” the report says.
 
CRFB estimates the lower balance resulting from debt cancellation would reduce the pace of repayment. That would exacerbate growth because interest would accrue on new loans that would not be paid back at the same pace and those loans would be for higher amounts because of increased tuition.
 
The organization said that instead of blanket loan forgiveness, Mr. Biden should have focused on policies that lead to less borrowing or better outcomes for borrowers. It concluded that Mr. Biden’s plan will lead to more borrowing and higher tuition going forward.

CRFB also estimated that the delay in payments, which has been overlooked compared to debt cancellation, will have a big cost for taxpayers.
 
It said the four-month payment pause extension will add $20 billion to the deficit. The repayment pause, which began under the COVID-19 crisis, has been extended seven times across two administrations for 33 months. That brings the total cost of the pause from the start of the pandemic to the end of this year to $155 billion.
 
Mr. Biden last month announced a plan to wipe student loan debt for tens of millions of Americans, canceling $10,000 in debt for those earning less than $125,000 a year and $20,000 for those who received Pell grants for low-income families.

The president also announced that the pandemic-era pause, which had been in effect since March 2020, would return at the end of the year.

Mr. Biden has insisted that his plan will help Americans climb out of debt and advance the economy by having more money to buy a home or start a business.

Critics, including some in Mr. Biden’s own party, have slammed the idea, fearing it could exacerbate already out-of-control inflation.