President Biden’s student loan handout program added $426 billion to the national debt and was a major contributor to the $1.4 trillion budget deficit in fiscal year 2022, according to the Congressional Budget Office.
"The increase in outlays primarily stems from $426 billion in costs estimated and recorded by the Administration in September 2022 to reflect the long-term costs of certain forms of student debt relief, including forgiving portions of federal student loans for many borrowers," the CBO said.
While people with student loans are not yet able to apply for the $10,000 or $20,000 handouts under Biden’s plan, the CBO said in a report this week that federal law requires the government to recognize those costs right away.
In addition, President Biden's plan will cost U.S. taxpayers between $440 billion and $600 billion over the next 10 years, according to the Committee for a Responsible Federal Budget.
"In accordance with the Federal Credit Reform Act, the full multiyear costs of those actions are recorded up front on a present-value basis," CBO said.
The CBO also said the estimated cost of the student loan handout put total Department of Education spending at $639 billion for fiscal year 2022, a level that rivals the Defense Department budget.
Because Biden announced his student loan plan near the end of the fiscal year, the budget deficit was higher than the CBO anticipated earlier in the year. The total revenue shortfall in FY2022 was $1.4 trillion, about half of the $2.8 trillion budget deficit in 2021, but still higher than expected.
Another factor contributing the elevated budget deficit is rising interest payments on the $31 trillion national debt. The government spent $534 billion to service that debt, a cost that is higher than annual spending on most federal departments.
The CBO said rising interest rates are one reason why the cost to service the debt is rising.
"Net outlays for interest on the public debt increased by $121 billion (or 29 percent), primarily because higher inflation this year has resulted in large adjustments to the principal of inflation protected securities," the CBO said.
Total spending in FY2022 was $6.2 trillion, down just a little from the $6.8 trillion in federal spending in 2021. Spending in 2021 was a record high because of the trillions of additional spending approved in 2020 and 2021 because of the COVID-19 pandemic.