Biden’s new student loan forgiveness program will cost taxpayers $475 BILLION over the next 10 years, economic modeling predicts
- Penn Wharton’s budget model sets reimbursement amounts based on income
- The Saving on a Valuable Education (SAVE) plan comes into effect in July 2024
- Projections say it will cost at least $390.9 billion and at most $558.8 billion.
President Joe Biden’s new student loan forgiveness plan based on income-based repayments will cost taxpayers $475 billion over the next ten years, an economic model has predicted.
He Penn Wharton Budget Model features the addition of one of Biden’s new pushes to relieve the debt of millions of Americans, after the Supreme Court struck down his first plan two weeks ago.
A conservative estimate sees the program cost as little as $390.9 billion over a decade, while the maximum projection puts the bill at $558.8 billion.
The median estimate was calculated at $474.9 billion, more than the projected cost of the original bailout.
It follows the Biden administration’s announcement Friday that $39 billion would be forgiven for 804,000 Americans.
President Joe Biden’s new student loan forgiveness plan based on income-based repayments will cost taxpayers $475 billion over the next ten years, an economic model has predicted.
The model shows an exponentially increasing amount of student loan debt over the next 10 years that will make taxpayers pay nearly $500 billion.
A parallel plan, Saving on a Valuable Education (SAVE), which takes effect on July 1, 2024, would cut monthly payments in half based on income.
It would also eliminate monthly payments for minimum wage workers and forgive all outstanding debts for Americans who have been paying for ten years and took less than $12,000.
The model found that this would also place a significant burden on taxpayers.
The results indicate that taxpayers will face $200 billion in cases due to payment reductions on the $1.64 trillion in outstanding loans in 2023.
The rest, about $275 billion, comes from reduced payments on about $1.03 trillion in new loans that the model estimates will spread over the next 10 years.
“We estimate a future loan acceptance rate of 70 percent, which implies that about $645 billion in future loans will be subsidized,” the economists stated in their conclusion.
‘Some 6.57 per cent of future borrowers (or 4.98 per cent of total anticipated loan volume) will never have to make any payments under SAVE.’
Penn Wharton economist Junlei Chen wrote: “Because of the increased generosity of the recently proposed IDR plan, prospective student borrowers have an incentive to increase their federal student loans, shifting the current pattern of college funding toward more loans instead of to pay out of pocket.
“Under this scenario, we consider the situation where prospective students react to the greatest generosity by maximizing the amount of the federal direct loan available to them.”
Supreme Court justices ruled in a 6-3 decision that the Education Secretary had no authority to pay off the debts of 20 million borrowers.
Under this plan, most community college students would not have to pay any debt, the Biden administration said.
Education Secretary Miguel Cardona’s announcement on Friday was called a ‘slap in the face’ for taxpayers.
David Williams, Chairman of the Taxpayers Protection Alliance, told DailyMail.com: ‘This new announcement is absurd and is a slap in the face for taxpayers.
“The Biden administration is hell-bent on recklessly spending hundreds of billions of taxpayer dollars to bail out wealthy student loan borrowers, even after being rebuked by the highest court in the land.
‘More than 80 percent of the country that doesn’t have student loans will be forced to subsidize the small percentage of Americans that do have loans. And, once again, the Biden administration is circumventing Congress.
“Whether it’s the mission of agencies like the Federal Trade Commission with politically motivated antitrust lawsuits, the Securities and Exchange Commission with ESG rules, or the latest Department of Education ending student loans, these actions need to stop again.” immediate”.
After Supreme Court justices ruled 6-3 to strike down Biden’s initial plan, the administration immediately declared they would continue to push for millions in aid.
The high court decided that the Secretary of Education had no authority to pay off the debts of 20 million borrowers.
Fury followed from taxpayers who had never been to college and Republicans who claimed middle-class Americans were funding a student bailout.
