Fact Check: Ted Cruz Says Student Debt Relief Costs $2,100 Per Taxpayer

Republicans are united in disagreement over President Joe Biden's plan to write off a chunk of federal student loan debt.

The administration said that it will cancel up to $20,000 in student debt for Pell Grant recipients and up to $10,000 for individual borrowers who make less than $125,000 per year, or $250,000 per year for married couples.

The GOP has labeled the policy "reckless". Senator Ted Cruz (R-TX) was one of those prominent Republicans voicing their criticism on social media.

Ted Cruz
Ahead of the policy announcement Sen. Ted Cruz took to Twitter, claiming the average cost per taxpayer of student debt forgiveness was $2,100. Here, Cruzspeaks during the America First Agenda Summit, at the Marriott Marquis hotel July 26, 2022 in Washington, DC. Drew Angerer/Getty Images

The Claim

In a tweet sent on August 24, 2022, Cruz quoted an analysis that suggests the average cost of the student debt forgiveness policy to each taxpayer would be $2,100.

The Facts

Cruz is not necessarily wrong to claim that the debt could cost Americans taxpayers, on average, $2,100 each, but there's more to it than that.

The figure comes from an analysis by the National Taxpayers Union (NTU), a fiscally conservative think tank.

The NTU calculated the average tax bill based on the Penn Wharton Budget Model, which estimates that the Biden policy would cost $329.1 billion over a 10-year period.

Then, the NTU divided the cost by the number of U.S. taxpayers (which it claims, based on 2019 IRS figures, to be 158 million), to reach an average tax bill of $2,085.59 per taxpayer.

It is worth noting that the figures produced by Penn Wharton and the NTU were made before the final policy announcement, and thus do not include the debt forgiveness proposal for those who received Pell Grants.

Pell Grant recipients account for more than 60 percent of the borrower population.

The NTU clarifies that the progressive U.S. tax code would mean that lower income taxpayers would pay less and higher earners significantly more.

For taxpayers earning between $1 and $50,000, NTU estimates a 10-year bill of $158.27, while those earning between $200,000 to $500,000 would pay $9,947.92.

It adds: "Some may dispute that taxpayers bear the cost of canceling student debt. But the $329 billion cost of student debt cancellation would be $329 billion previously borrowed from the federal government and not returning to the Treasury.

"Policymakers will need to make up for that gap in the future with government spending cuts, tax increases, more borrowing, or some combination thereof."

This analysis is not necessarily incorrect but it does miss some details.

To clarify, Newsweek spoke to Kent Smetters, faculty director of the Penn Wharton Budget Model, who repeated that the debt forgiveness policy "is not funded with a tax but with deficits" but would not comment "on whether metaphors are appropriate."

He said: "It seems that they are dividing the costs by the number of current taxpayers. We don't do this type of calculation since the costs are deficit financed and partly financed by future taxpayers as well."

So, not only will the current policy be financed by government borrowing (and therefore not have an immediate tax burden), calculating an average cost now probably wouldn't accurately predict what its eventual tax bill might be.

A photo of Texas Senator Ted Cruz
Sen. Ted Cruz (R-TX) on stage during the Turning Point USA Student Action Summit held at the Tampa Convention Center on July 22, 2022 in Tampa, Florida. Getty

Furthermore, as the architecture of the Inflation Reduction Act shows, the policy could be funded by means that do not directly tax all American citizens.

It's also worth mentioning that while the full NTU analysis explains the theoretical tax bill is spread across the course of the policy's 10-year budget, neither Cruz's tweet nor the NTU's tweet he quoted does so.

Broken down further, the cost looks different. For example, the increase in bills per month for the highest taxpayers would come to around $83, while those in the lowest bracket would see about a $1.31 increase. The average monthly cost would be around $17.30.

While it's important to highlight what the impact of the bill could be, Cruz's tweet does not fully explain the NTU analysis and its subtleties.

Newsweek has contacted Cruz for comment.

The Ruling

Needs Context

Needs Context.

Ted Cruz nor the NTU is wrong to theorize that the debt forgiveness policy could end up costing tax-paying Americans on average $2,100 each.

However, as stated by NTU, the cost of the policy is spread over the course of 10 years and if it was paid for directly by taxpayers, it would be progressively distributed across income brackets so those less well-off would pay significantly less than $2,100.

For some, the increase on a monthly basis would be less than $1.50.

In any case, the debt forgiveness policy has been deficit-financed, so there is no immediate cost to U.S. taxpayers. Future taxpayers may contribute to the cost of the bill, which could alter the average payout. There are several ways the policy may be paid for that may not directly impact all Americans.

FACT CHECK BY Newsweek's Fact Check team

Needs Context: The claim requires more information to set it in the appropriate context. The claim as presented may be partly true, but cannot be fully or correctly understood without the right context.
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