Washington(CNN) President Joe Biden's plan to cancel up to $20,000 in federal student loan debt for low- and middle-income borrowers could cost $400 billion, according to a Congressional Budget Office report released Monday.
Biden announced the forgiveness plan in August, after facing mounting pressure from progressives to broadly cancel some student loan debt.
The Department of Education plans to release an application for the program in October. No student debt has been canceled yet.
The CBO, which conducts nonpartisan analysis for Congress, warned in the report that the estimates are "highly uncertain."
The estimate relies on a number of assumptions, including how many eligible borrowers will apply, as well as what portion of the outstanding federal student loan debt may not have been repaid anyway over the lifetime of the loans due to other existing forgiveness programs, for example. Those projections depend in part on future economic conditions, the CBO said.
The White House is expected to release its own estimate of Biden's student loan forgiveness plan in the coming weeks. The administration previously said the plan would reduce cash flow by about $24 billion in the first year.
Under Biden's plan, individual borrowers who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years will see up to $10,000 of their federal student loan debt forgiven.
If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness. Pell grants are awarded to millions of low-income students each year, based on factors including their family's size and income and the cost charged by their college. These borrowers are also more likely to struggle to repay their student debt and end up in default.
Key Democratic lawmakers, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have been pressuring Biden to cancel up to $50,000 in federal student loan debt per borrower since he took office. While the President's plan will cancel less debt than they called for, Democrats have applauded the move.
In a joint statement released Monday, Schumer and Warren called Biden's forthcoming cancellation action "transformative" for the middle class.
"Today's CBO estimate makes clear that millions of middle class Americans have more breathing room thanks to President Biden's historic decision to cancel student debt," they said.
But Republicans have slammed Biden's student loan forgiveness plan as a giveaway that unfairly transfers wealth from the working class to people who went to college.
"CBO's $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility," said North Carolina Rep. Virginia Foxx, Republican leader on the House Education and Labor Committee, in a statement Monday.
Some Republican attorneys general and conservative groups are working on a legal strategy to keep the plan from taking effect.
The CBO estimate did not take into account Biden's proposal to streamline the income-driven repayment plan, an effort to reduce the monthly payments of future student loan borrowers, which could drive up the total cost to the government.
Maya MacGuineas, president of the independent group called the Committee for a Responsible Federal Budget, has also criticized Biden's student debt action and said in a statement Monday that it "would wipe out the ten-year savings from the Inflation Reduction Act twice over."
The Inflation Reduction Act, a sweeping health care and climate bill endorsed by Biden, passed in August.
"The Biden-Harris Administration's student debt relief plan provides breathing room to tens of millions of working families," said White House spokesperson Abdullah Hasan.
"It's a stark contrast to the Trump tax bill, which ballooned the deficit by nearly $2 trillion and provided the vast majority of benefits to big corporations and the wealthiest individuals," he added.
This story has been updated with additional information.