A Penn Wharton Budget Model reveals the cost of Biden's new student loan cancellation plan.
A study by the University of Pennsylvania’s Penn Wharton Budget Model (PWBM) has estimated that Biden's new student loan debt relief proposal will cost an additional $84 billion, bringing the total for the administration’s plans, including the Saving on a Valuable Education (SAVE) plan, to approximately $559 billion over ten years.
Staff
One of the significant proposals includes eliminating up to $20,000 in runaway interest for borrowers, which the PWBM estimates could cost around $58 billion. Another $19 billion is expected to go towards discharging balances for those in the repayment stage for over 20 years. Additionally, the federal government plans to assist borrowers experiencing hardship in repaying loans, estimated to cost about $7.2 billion.
The SAVE plan, introduced last year, focuses much of its aid based on individual or household income. PWBM noted that some longer-term student debt relief would benefit households with higher incomes under the new plans.
A federal lawsuit has been filed by a coalition of seven Republican-led states seeking to block the SAVE Plan, which they argue is an unauthorized grant program by the administration.
Despite the opposition, Vice President Kamala Harris confirmed that under the new provisions, student loans would be forgiven after a certain period, regardless of income. The Department of Education claims that Congress gave it the authority to define repayment plan terms in 1993.
The administration is facing a multi-state legal challenge, which comes after the Supreme Court's rejection of President Biden’s $400 billion plan to abolish or reduce federal student loan debts in June 2023.
