Report: Biden’s student loan repayment plan to cost around $500B.
The Biden Administration’s Regulatory Changes to Student Loan Repayment Program Could Cost Taxpayers Nearly $500 Billion
A new report from the Penn Wharton School of Business reveals that the Biden administration’s regulatory changes to the Income Driven Repayment (IDR) program for student loans could have a significant financial impact. The report estimates that these changes will result in a net cost of $475 billion over the next decade.
Changes to the IDR Program
Previously, borrowers participating in the IDR program had to pay 10% of their discretionary income above the poverty line and could have their loans forgiven after 20 years. However, the new regulations have lowered the required payment to 5% and reduced the forgiveness threshold to 10 years.
The report highlights that $200 billion of the estimated cost is directly attributed to the lowered payments for existing student loans. Additionally, the university predicts that 53% of all student loan repayment plan to cost around 0B.”>federally held student loans will be shifted to the IDR program. The remaining expected cost will come from loans that have not yet been disbursed but will be in the coming years.
Efforts to Limit Student Loan Repayment
The changes to the IDR program are part of the Biden administration’s broader efforts to reduce the burden of student loan repayment. President Biden initially proposed forgiving up to $20,000 in federally held student loans for borrowers earning less than $125,000. However, this plan was struck down by the Supreme Court as an overreach of executive power. The administration is now exploring alternative means to implement a similar forgiveness plan.
Political Reactions
The Wharton School of Business report has sparked political debate, with Senator Bill Cassidy (R-LA) criticizing the changes to the IDR program as ”irresponsible and unfair.” Cassidy argues that the burden of student loan repayment is being shifted from those who willingly took out loans to Americans who never attended college or have already paid off their loans.
White House press secretary Karine Jean-Pierre, on the other hand, dismissed the Penn Wharton report during a press briefing. She stated that the Department of Education estimated the cost to be $156 billion over 10 years and emphasized that the administration’s actions are aimed at reducing the deficit.
Despite differing opinions, the Biden administration’s regulatory changes to the IDR program continue to be a topic of discussion and scrutiny.
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