White House says student loan forgiveness plan will cost $24 billion a year

[August 26, 2022]  By Costas Pitas
 
(Reuters) - A U.S. plan announced this week to forgive $10,000 in student loans for millions of debt-saddled former college students will cost roughly $24 billion a year assuming that three quarters of those eligible take up the offer, the White House said.

Empty boxes are taken out during move in day as Bennett College students return to campus for the first time since the HBCU Liberal Arts College went remote to prevent the spread of the coronavirus disease (COVID-19) in March 2020, in Greensboro, North Carolina, U.S., August 30, 2021. REUTERS/Gabrielle Crockett/File Photo

The move, announced by President Joe Biden on Wednesday, kept a pledge he made in the 2020 campaign for the White House and could boost support for his fellow Democrats in the November congressional elections.

Some economists said it may fuel inflation and Republicans mostly oppose student loan forgiveness, calling it unfair because it will disproportionately help people earning higher incomes.

On Wednesday, the White House said it had yet to determine the price tag for the package but on Thursday, White House spokesperson Karine Jean-Pierre told CNN:

"Assuming that 75% of folks take us on on the President's student loan cancellation plan, and you look at the average cash flow on that, it's going to be about $24 billion per year."

American university tuition fees are substantially higher than in most other rich countries, and U.S. consumers carry $1.75 trillion in student loan debt, most of it held by the federal government.

(Reporting by Costas Pitas in Los Angeles; Editing by Christian Schmollinger and Jacqueline Wong)

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