WASHINGTON — Texas Republican lawmakers have been quick to attack President Joe Biden’s student loan forgiveness plan as a heavy burden for taxpayers. However, the arguments used don’t give the full picture of the situation faced by millions of families now sorting out how the forgiveness program impacts them.
The plan cancels $10,000 for borrowers making less than $125,000, and $20,000 for Pell Grant recipients. It also extends the payment pause through the end of the year, resuming Jan. 1, 2023.
Texas Sen. Ted Cruz and most other conservatives strongly oppose the plan, with some raising the prospect of legal challenges. Cruz also has raised the possibility the plan could win voter support for Biden and the Democratic Party in the Nov. 8 midterm elections from “slacker” baristas who studied useless subjects.
In criticizing the plan, Cruz issued a statement contending “this will cost every taxpayer an average of $2,100.” If the cancellation is funded through tax increases, it could raise taxes by $2,500 per taxpayer, according to the most recent analysis by the National Taxpayers Union Foundation.
However, Cruz and other Republicans have taken that figure out of context, other experts counter.
Andrew Lautz, director of federal policy at the National Taxpayers Union, explained in a blog post his organization came to $2,500 as a simple calculation of the total estimated cost of the plan divided by the number of U.S. taxpayers.
However, due to the U.S. taxation model, the potential increase would vary by income bracket. Additionally, the increased amount would be spread over 10 years. For example, a taxpayer making $1 to $50,000 is likely to only see an increase of $19 per year.
The assertion that Biden’s move will automatically launch a tax hike is also misleading. The White House has not completed an official estimate of the plan’s costs, and there is no definite plan on how it will be paid for.
Additionally, Biden cannot single-handedly raise taxes. Rather, the plan will more immediately be paid for with more debt. While that practice can have implications for taxpayers down the road, it does not mean an immediate impact on taxes.
“In short, no one’s taxes are immediately going up to pay for student cancellation now,” Lautz wrote in a blog post.
Maya MacGuineas, President of the Committee for a Responsible Federal Budget, said it’s difficult to pinpoint an exact cost of the plan because of many unknown parameters but her organization estimates it could be from $440 billion to 600 billion over 10 years. She added other groups are estimating it may cost significantly more.
One of the factors that may separate the range of estimates is the take-up rate, or how many students actually take advantage of the plan. MacGuineas said the White House is assuming a lower take-up rate than the Committee for a Responsible Federal Budget.
Specifically, MacGuineas explained the White House is assuming that the budget deficit that is decreasing as we move away from the pandemic and stimulus borrowing can be used to offset the costs of the plan.
“That’s just a huge distortion of budgeting, but there is no discussion of paying for it,” MacGuineas said.
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