In a renewed effort to alleviate the burden of student loan debt on millions of Americans, President Biden has unveiled a new plan to cancel student loan balances for up to 25 million borrowers. This comes after the Supreme Court shot down his initial attempt to implement such debt relief last year. The Biden administration is now citing a different legal justification for this proposal, hoping it will withstand any future court challenges.

Under the new plan, the government aims to write down student loan balances by an amount ranging from $5,000 to $20,000 for the majority of borrowers. This means that some individuals may have their entire loan amounts forgiven. Economists anticipate that the reduced debt load on consumers will stimulate spending and contribute to economic growth, although there are concerns about potential inflation.

However, it is important to acknowledge that the cost of cancelling student loan debt is not insignificant. While it may be government money, the forgiveness of debt payments means that the government will be forfeiting future revenue. This will contribute to annual deficits and ultimately add to the total national debt. Essentially, future taxpayers will bear the financial burden of this debt cancellation.

The Biden administration has not provided a specific cost estimate for the latest plan, which consists of various loan-forgiveness programs mainly targeting individuals who have been making loan payments for over 20 years. If the new programs are implemented successfully, and assuming an average forgiveness amount of $5,000 per borrower, the forgone revenue would amount to roughly $125 billion over several years. If the average forgiveness amount increases to $20,000 per borrower, the cost could reach a staggering $500 billion. These figures are in line with the cost of the previous plan that was struck down by the Supreme Court.

The Congressional Budget Office (CBO) estimated that Biden's initial student loan forgiveness program, proposed in 2022, would have cost the government $400 billion in lost revenue over 30 years. The new plan may involve less money since it targets a smaller number of individuals, but the lost revenue could accrue over a shorter timeframe due to the fact that many qualifying loans are closer to being paid off.

While $400 billion may seem like a substantial sum, it is essential to consider it within the context of the total national debt. It represents only 1.2% of the overall debt. Nonetheless, if Congress were to pass a $400 billion package for benefit enhancements or tax breaks, it would likely face significant opposition and scrutiny. Such large-scale packages tend to be approved in emergency situations like the COVID-19 pandemic or when one party controls all branches of government.

It is worth noting that President Biden is pursuing student debt cancellation through regulatory and executive actions because Congress has consistently shown that it would not pass legislation on this matter. Even when the Democrats held the majority in both houses of Congress during Biden's first two years in office, there was no serious effort to enact student debt cancellation. The issue does not garner support from Republicans, and even some Democrats believe taxpayer dollars could be better utilized elsewhere.

Critics argue that federal aid programs are most effective when they target those in the greatest need, such as low-income families with young children, working parents, or older individuals struggling with healthcare costs. Student debt relief, on the other hand, tends to benefit individuals who have attained a college degree or have some college education, placing them within the top 60% of the national income distribution. There is no equivalent aid available for high school graduates who choose not to pursue higher education or for those who worked their way through college without incurring debt.

Furthermore, a significant concern with debt cancellation is that without accompanying reforms to the student debt program, it would be a one-time windfall for a specific cohort of borrowers who meet the qualification criteria. It would not address future debt or debt that previous borrowers have already paid off. According to the Committee for a Responsible Federal Budget's analysis of Biden's previous debt-relief program, after approximately $500 billion of debt cancellation, the total outstanding student debt would return to its previous level of $1.6 trillion within five years. This raises questions about the sustainability of canceling student debt without implementing systemic reforms.

Despite the potential challenges and criticisms, President Biden remains committed to fulfilling his campaign promise of tackling student debt. As the 2024 reelection campaign approaches, he aims to have tangible results to showcase. Republican opponents have already begun attacking the plan, with some labeling it as a "lawless" effort and an unsustainable drain on taxpayer funds.

It is important to note that both Republicans and Democrats have their own priorities when it comes to fiscal responsibility. Republicans hope that a future Republican administration, potentially under former President Donald Trump, would implement tax cuts and policies that primarily benefit the wealthy. The issue of the mounting national debt is often brought up, but it seems that political considerations often outweigh concerns about fiscal probity when it comes to election campaigns.

In conclusion, President Biden's new proposal to cancel student loan debt for up to 25 million borrowers demonstrates his determination to address the pressing issue of student debt in America. While the plan holds the potential to provide significant relief for many individuals, it also carries financial implications, with the government forgoing future revenue and adding to the national debt. The battle on the legality and viability of such a program is expected to intensify, with Republicans and Democrats entrenched in opposing views on the best allocation of taxpayer resources.