Biden’s new student loan forgiveness program will cost taxpayers $475 BILLION over next 10 years, economic model predicts
- Penn Wharton Budget Model captures the sum of income-related repayments
- The Saving on a Valuable Training (SAVE) plan will take effect in July 2024
- Forecasts say it will cost a minimum of $390.9 billion and a maximum of $558.8 billion
President Joe Biden’s new student loan forgiveness plan, based on means-tested repayments, will cost taxpayers $475 billion over the next decade, an economic model predicted.
The Penn Wharton budget model explains the sum of one of Biden’s new attempts to provide debt relief to millions of Americans – after the Supreme Court rejected his first plan two weeks ago.
Conservative estimates put the program at just $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 on Friday that $39 billion would be forgiven for 804,000 Americans.
President Joe Biden’s new student loan forgiveness plan, based on means-tested repayments, will cost taxpayers $475 billion over the next decade, an economic model predicted
The model shows an exponentially growing amount of student loan debt over the next 10 years, which will pay taxpayers nearly $500 billion
A parallel plan, Saving on a Valuable Education (SAVE), effective July 1, 2024, would halve monthly means-tested payments.
It would also eliminate monthly payments for minimum wage earners and cancel all outstanding debts for Americans who have been paying for 10 years and collect less than $12,000.
The model showed that this would also place a significant burden on taxpayers.
The results show that taxpayers will face $200 billion in business because of payment discounts on the $1.64 trillion in outstanding loans by 2023.
The remainder, about $275 billion, comes from reduced payments on about $1.03 trillion in new loans that the model predicts will be spread over the next 10 years.
“We estimate a future borrowing rate of 70 percent, implying that approximately $645 billion of future borrowing will be subsidized,” the economists said in their conclusion.
“About 6.57 percent of prospective borrowers (or 4.98 percent of the total predicted loan volume) will never have to make payments under SAVE.”
Penn Wharton economist Junlei Chen wrote, “Thanks to the increased generosity of the newly proposed IDR plan, prospective student borrowers have the incentive to increase their federal student loans, shifting the current college funding pattern toward more borrowing rather than paying out . -bag.
“In this scenario, we consider the situation where prospective students respond to the increased generosity by maximizing the maximum amount of federal direct loan available to them.”
Supreme Court justices ruled in a 6-3 decision that the education minister had no authority to clear the debts of 20 million borrowers
Under this plan, most community college students would not have to pay back any debt, the Biden administration said.
Education Secretary Miguel Cardona’s announcement on Friday was called a “slap in the face” by taxpayers.
David Williams, president of the Taxpayers Protection Alliance, told DailyMail.com: “This new announcement is absurd and a slap in the face to taxpayers.
“The Biden administration is determined to recklessly spend hundreds of billions of tax dollars to bail out wealthy student loan borrowers, even after being rebuked by the nation’s highest court.
More than 80 percent of the country without student loans will be forced to subsidize the small percentage of Americans who do have loans. And again, the Biden administration is bypassing Congress.
“Whether it’s mission creep by agencies like the Federal Trade Commission with politically motivated antitrust cases, the Securities and Exchange Commission with ESG rules, or the latest Department of Education to end student loans, these actions must be stopped immediately.”
After the Supreme Court judges ruled 6-3 to overturn Biden’s original plan, the administration immediately declared they would continue pushing for millions in aid.
The Supreme Court ruled that the Minister of Education was not authorized to pay the debts of 20 million borrowers.
It followed anger from taxpayers who have never been to college and Republicans who claimed that middle-class Americans were funding a student bailout.