How Much Does Student Loan Forgiveness Cost?

Updated on October 1, 2026 | Written by Alec Pow
This article was researched using 2 sources. See our methodology and corrections policy.

Student loan forgiveness has erased roughly $189 billion in federal loan balances through major relief programs in recent years, but that does not mean the federal government simply wrote a $189 billion check. The true government cost is measured by the loan payments, interest, and other cash flows the Treasury no longer expects to collect, discounted over time under federal credit-accounting rules.

For newly issued federal student loans, the Congressional Budget Office currently estimates a $3.3 billion lifetime budget cost for the 2026 loan cohort and $3.6 billion for the 2027 cohort. Using fair-value accounting, which also incorporates market risk, CBO puts those same costs much higher at $15.0 billion for 2026 and $13.7 billion for 2027.

Article Highlights

• Roughly $188.8 billion (at $30 per hour, earning that amount would take about 3 million years of full-time work, before taxes) in federal student debt relief had been approved for about 5.3 million borrowers through January 2025 across PSLF, IDR adjustments, disability discharge, borrower defense, and related programs.
• The famous $400 billion CBO estimate referred to the separate 2022 mass-cancellation proposal that was later blocked by the Supreme Court.
• CBO estimates new federal student loans issued in 2026 will cost the government $3.3 billion over their lifetime under standard federal budget accounting.
• The 2027 loan cohort is projected to cost $3.6 billion on the same basis.
• Using fair-value accounting, CBO estimates much larger lifetime costs of $15.0 billion for 2026 and $13.7 billion for 2027.
• Forgiveness raises federal loan-program costs because it eliminates future borrower payments that otherwise would have flowed back to the government.
• Not every dollar forgiven costs taxpayers exactly one dollar because some balances would never have been fully collected anyway.

How Much Does Student Loan Forgiveness Cost?

The simplest answer is that federal student loan forgiveness costs the government by reducing the amount of principal and interest it expects to collect from borrowers.

The Congressional Budget Office explains this directly in its analysis of income-driven repayment and forgiveness: once a remaining balance is forgiven, borrower payments stop, reducing future cash flows to the government and increasing the federal student-loan subsidy cost.

That does not mean the government pays cash to the borrower equal to the amount forgiven. The accounting effect is closer to writing down the value of a federal financial asset because some expected repayments will no longer arrive.

How Much Has Been Forgiven?

Through January 2025, federal relief approved under several programs totaled approximately $188.8 billion (about 3 million years of full-time work at $30 per hour) for about 5.3 million borrowers.

That total included multiple legally distinct programs, such as:

• Public Service Loan Forgiveness;
• income-driven repayment account adjustments;
• total and permanent disability discharge;
• borrower defense;
• closed-school and related discharges.

This historical total is best understood as the face value of federal balances approved for relief, not as a direct measure of federal budget cost.

The distinction matters because federal student loans are assets expected to generate future repayments. Some would have been repaid in full, some partially, and some would have defaulted or been discharged even without a policy change.

The $400 Billion Figure

The widely cited $400 billion (about 6.4 million years of full-time work at $30 per hour) student loan forgiveness cost belongs to a different policy.

In September 2022, CBO estimated that the proposed one-time cancellation of up to $10,000 for many eligible borrowers and up to $20,000 for qualifying Pell Grant recipients would increase the cost of outstanding federal student loans by approximately $400 billion in present-value terms.

The CBO estimate was a projection of the budget impact if that cancellation plan took effect.

It did not.

On June 30, 2023, the Supreme Court ruled in Biden v. Nebraska that the Department of Education lacked authority to implement the plan as announced. CBO subsequently removed the planned cancellation from its scoring baseline. The agency says it removed approximately $315 billion in remaining estimated cancellation costs after the ruling.

So the $400 billion figure should not be described as money the federal government has already spent on student loan forgiveness.

Current Loan Costs

The best current government-cost figures come from CBO’s estimates for newly issued student loans.

For loans issued in 2026, CBO estimates an average federal subsidy rate of 3.9% under the Federal Credit Reform Act, or FCRA. That translates into a projected $3.3 billion lifetime budgetary cost for the 2026 student-loan cohort.

For 2027, CBO projects a lifetime FCRA cost of $3.6 billion.

Loan Cohort	FCRA Lifetime Cost	Fair-Value Lifetime Cost
2026 federal student loans	$3.3 billion	$15.0 billion
2027 federal student loans	$3.6 billion	$13.7 billion

These figures cover the lifetime expected cost of those loan cohorts, not just forgiveness. They incorporate expected repayment behavior, defaults, interest subsidies, RAP provisions, PSLF eligibility, and other program features.

Why Fair Value Is Higher

CBO publishes two different cost measures because they answer different questions.

FCRA accounting is the method used in the federal budget. It discounts expected future loan cash flows using Treasury rates.

Fair-value accounting also incorporates the market risk associated with uncertain future repayments.

For 2026 loans, that difference is striking:

• FCRA cost: $3.3 billion
• Fair-value cost: $15.0 billion
• Difference: $11.7 billion

For 2027, the difference is about $10.1 billion.

Neither number is inherently “the real one” in every context. FCRA is the official federal budget measure, while fair value is designed to show more of the economic risk borne by the government.

Why $1 Forgiven Is Not $1 of Cost

This is the most important concept in the article.

If the government forgives $50,000 of a borrower’s balance, the budget cost is not automatically $50,000.

GAO explains that forgiveness amounts and subsidy costs are different measures. Forgiveness is the nominal balance written off. Subsidy cost is the present value of expected government cash outflows minus expected repayments, interest, fees, and recoveries.

For example, imagine a borrower has $50,000 remaining but the government expected to collect only $30,000 in present-value terms because of income-based payments and default risk.

If the entire $50,000 were forgiven, the relevant economic loss to the government could be closer to the expected $30,000 cash flow than the full face-value balance.

Conversely, forgiveness of a high-quality loan that otherwise would have been repaid almost entirely creates a larger government cost relative to its face value.

RAP and Forgiveness

The federal repayment system changed substantially in 2026.

The SAVE plan ended following litigation, and the new Repayment Assistance Plan, or RAP, became available July 1, 2026.

CBO says RAP:

• sets payments between roughly 1% and 10% of adjusted gross income;
• requires a minimum $10 monthly payment;
• reduces monthly payments by $50 per dependent;
• waives unpaid interest not covered by the monthly payment;
• matches up to $50 of a borrower’s monthly payment toward principal;
• forgives the remaining balance after 30 years.

CBO expects RAP to cost less than the income-driven plans it replaced because borrowers generally pay more under the new structure.

That is one reason CBO’s projected subsidy rate for 2026 loans fell sharply from its earlier projection for 2025.

PSLF Cost

Public Service Loan Forgiveness creates another major government cost because qualifying borrowers can have their remaining Direct Loan balance erased after the equivalent of 120 qualifying monthly payments while working in eligible public service.

There is no dollar cap on PSLF forgiveness.

CBO says borrowers enrolled in RAP may also qualify for PSLF after 10 years of qualified payments, well before RAP’s normal 30-year forgiveness point.

This means two borrowers with identical loan balances can create very different federal costs depending on income, repayment plan, employer, and how much balance remains when PSLF eligibility is reached.

The federal government also changed PSLF eligibility rules effective July 1, 2026. The Department of Education estimated one 2025 final rule affecting qualifying employers would produce approximately $1.616 billion in federal budget savings by reducing transfers to borrowers who would no longer receive credit toward forgiveness under the new rule.

Worked Cost Example

Consider a simplified federal loan portfolio with $100 million in outstanding balances.

Suppose budget analysts expect borrowers, after defaults and income-based repayment, to return only $80 million in present-value principal and interest.

If a new policy forgives $25 million of balances but $10 million of that amount was already unlikely to be collected, the government’s additional economic loss is not necessarily the full $25 million.

A simplified estimate could look like:

• Face value forgiven: $25 million
• Amount already unlikely to be collected: $10 million
• Additional expected cash-flow loss: roughly $15 million

Real federal modeling is much more complicated, but this example explains why headlines about balances forgiven should not be substituted for CBO subsidy-cost estimates.

Per Taxpayer Cost

Dividing a national forgiveness estimate by the number of tax returns is mathematically possible but economically misleading.

For example, $400 billion divided by roughly 160 million individual tax returns produces about $2,500 per return.

But no taxpayer receives a $2,500 invoice.

Federal student-loan costs are financed through the government’s overall budget. If forgiveness increases the deficit relative to baseline, the effect can ultimately appear through higher borrowing, lower future spending elsewhere, higher future revenues, or some combination of those outcomes.

The exact burden is not evenly distributed among taxpayers and cannot be reduced accurately to a single household charge.

Federal Portfolio Size

The scale of the government exposure matters.

The Department of Education reported in 2025 that the outstanding federal student-loan portfolio was approximately $1.67 trillion across 42.3 million borrowers.

That means even modest changes in subsidy rates can translate into billions of dollars in federal budget effects.

For example, one percentage point applied to $100 billion of newly issued loans represents roughly $1 billion before considering timing and discounting.

This is why relatively small changes in repayment rules, interest subsidies, or forgiveness eligibility can materially change CBO’s projected cost.

Administrative Costs

Debt cancellation itself is not the only government expense.

Federal agencies also pay for loan servicing, data systems, application processing, call centers, compliance, legal work, and program administration.

A 2026 Education Department rule reviewed by GAO estimated:

• about $10.4 million for government system updates;
• about $5.5 million for staffing;
• roughly $7.4 million annually for ongoing system operations under one discount-rate assumption.

Those numbers relate to a specific rule rather than the entire student-loan system, but they illustrate why administrative cost should be kept separate from balances forgiven.

Blocked vs Ongoing Forgiveness

There are two very different stories that are often mixed together.

Blocked one-time mass cancellation: CBO estimated about $400 billion for the 2022 proposal. The Supreme Court stopped that program before implementation.

Ongoing statutory forgiveness: programs such as PSLF, borrower defense, disability discharge, and income-based forgiveness continue under federal law and current regulations.

The cost of those ongoing programs is embedded in the federal government’s student-loan subsidy estimates rather than represented by one single $400 billion number.

Who Bears the Cost?

When loans are forgiven, borrowers benefit because future repayment obligations disappear.

The federal government bears the direct financial effect because it gives up expected loan cash flows.

How that ultimately affects households is a broader fiscal-policy question. Higher federal subsidy costs can contribute to larger deficits if not offset elsewhere, while borrowers receiving relief have more disposable cash than they otherwise would.

Economists and policymakers disagree about the distributional and economic effects of forgiveness. Some emphasize borrower relief, delinquency reduction, and improved household balance sheets. Others emphasize the federal cost, distribution across borrowers, and potential effects on deficits and future tuition incentives.

The cost accounting itself is less disputed: forgiveness reduces expected federal loan repayments and therefore increases the subsidy cost of the loan program relative to a scenario in which those payments were collected.

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Hidden Costs

The largest hidden cost is forgone future interest. When a balance disappears early, the government loses not only principal repayments but also interest payments that could have arrived over many years.

Default risk pushes the other way. If a loan was unlikely to be repaid anyway, forgiving it costs less than the face value suggests.

Administrative expenses add system and staffing costs beyond the loan write-down itself.

Federal borrowing costs can matter if forgiveness increases deficits relative to baseline, although assigning a precise Treasury-interest cost to one forgiveness program requires assumptions about how the rest of the federal budget responds.

Policy changes can also create large re-estimates. Federal credit programs are routinely rescored as repayment behavior, legislation, economic conditions, and court decisions change.

What We Verified

We checked current Congressional Budget Office estimates for federal student loans issued in 2026 and 2027, CBO’s 2022 mass-cancellation estimate, CBO’s explanation of forgiveness and subsidy costs, GAO’s federal credit-accounting guidance, current Federal Student Aid repayment rules, Department of Education portfolio data, and the Supreme Court decision concerning the 2022 cancellation proposal.

Current CBO projections place the lifetime FCRA cost of 2026 student loans at $3.3 billion and 2027 loans at $3.6 billion. Fair-value estimates are substantially higher at $15.0 billion and $13.7 billion respectively.

We also verified that forgiveness amounts and subsidy costs are distinct. Federal budget cost depends on expected repayments, interest, defaults, timing, and other cash flows rather than simply the nominal amount erased.

The approximately $400 billion CBO estimate applies specifically to the 2022 one-time cancellation proposal and should not be treated as current federal spending because that program was blocked before implementation.

Answers to Common Questions

How much has student loan forgiveness cost the government?

There is no single current total that equals the face value of every balance erased. Roughly $189 billion in relief had been approved through major programs by January 2025, but federal budget cost is lower or higher depending on the expected cash flows associated with those loans.

Did student loan forgiveness cost taxpayers $400 billion?

The $400 billion figure was CBO’s projected cost for the 2022 mass-cancellation plan. That plan was blocked by the Supreme Court and did not take effect as proposed.

How much will current student loans cost the government?

CBO estimates loans issued in 2026 will cost about $3.3 billion over their lifetime under federal budget accounting. Loans issued in 2027 are projected to cost about $3.6 billion.

Why is fair-value cost much higher?

Fair-value estimates incorporate market risk in addition to expected cash flows. CBO estimates 2026 federal student loans at $15.0 billion on that basis, versus $3.3 billion under FCRA.

Does every $1 of loan forgiveness cost the government $1?

No. The government cost depends on how much of that dollar was realistically expected to be repaid, when it would have been repaid, and the interest and default assumptions attached to the loan.

Who ultimately pays for student loan forgiveness?

The federal government absorbs the direct reduction in expected loan repayments. If those costs increase the federal deficit and are not offset elsewhere, they ultimately become part of the government’s broader financing requirements rather than a specific bill charged equally to each taxpayer.