Biden’s Student Loan Forgiveness 2.0 may incur a hefty $475B expense.

Ben WilsonJuly 19, 2023

President ‍Biden’s New Plan to ⁢Erase Student Loan Debt Could Cost ‌$475 Billion

According to ‌economists at ‍the University of ⁣Pennsylvania,‌ President Joe Biden’s new plan⁤ to⁤ erase student loan debt, following the ⁢Supreme ⁤Court’s blockage ⁤of his initial plan, could have⁢ a price ‌tag‍ of around $475 billion.

⁣

The Court last month overturned Biden’s order to ‍give borrowers $10,000 to‍ $20,000 in one-time student debt forgiveness. ‌The Court‌ stated that ⁣the president exceeded‌ his powers and bypassed Congress’s authority to legislate spending.

The administration swiftly ‌introduced an alternative‍ plan to alleviate student debt. In a recent announcement, Biden⁢ unveiled the ⁢Saving on Valuable Education (SAVE)‌ plan, ⁤proposed by the Education Department. This ⁢plan aims to reduce‌ loan payments by thousands of dollars over the course ⁢of borrowers’ lives.

Under this policy, individuals ⁢earning less than ⁣$32,805 per year would see‌ their monthly⁤ payments reduced ⁢to ⁣$0.

The SAVE plan,⁣ set to take effect⁢ in July 2024, is ‌estimated to cost⁢ approximately $475 billion over ⁢the‍ next ⁢decade,⁢ according to the Penn ⁣Wharton Budget Model.‌ However, the actual cost could potentially ⁤be even higher, as⁤ reported by The Hill:

The model predicts‍ that $200 billion will be allocated towards payment reductions from the $1.64‌ trillion in⁢ outstanding loans in 2023, while the remaining $275 billion will ⁣go towards ‍the‌ expected $1.03⁣ trillion in ⁣outstanding loans⁤ over the next 10 years.

⁤

It is projected that approximately 6.57 percent of future borrowers will ⁤not have to repay ‌any money under this plan.

On the conservative⁣ side, the‍ model suggests ⁣that the program‌ could cost around $390 billion, with a maximum projection exceeding $558 billion.

The Supreme Court’s 6-3 ‍decision to overturn Biden’s initial attempt ⁤at student debt forgiveness saved the United States‍ an estimated $300 ‌billion in spending. The Education Department had previously estimated that‌ the debt relief ⁤would cost $30 billion⁤ annually for the next decade.