Biden’s Latest Student Loan Gambit Could Cost Billions, Experts Say
Alexa Schwerha on March 14, 2023
The Biden administration’s latest plan to reform student loan repayments could cost $230 billion over a ten-year span, the Congressional Budget Office (CBO) estimated on Monday.
The new income-driven repayment (IDR) plan seeks to lower monthly payments for low- and middle-class borrowers by slashing in half the percent borrowers pay per month based on their income, ensuring single borrowers making less than $15 per hour do not have to make a monthly repayment, waiving unpaid debt after 10 years and covering unpaid monthly interest, according to the Federal Student Aid office. The plan could increase the cost of outstanding student loans by $76 billion while the cost of new loans could increase by $154 billion during this time, the CBO estimated.
The total predicted cost depends on the Supreme Court’s upcoming decision on whether the Biden administration’s plan to cancel up to $20,000 for Pell Grant recipients in student loan debt is constitutional, the letter reads. If the court rulesagainst the administration, the total cost could amount to $276 billion as another $46 billion in outstanding loans would be added in 2023.
The findings were provided in a Monday letter to Republican Virginia Rep. Virginia Foxx, who serves as chairwoman of the Committee on Education and the Workforce, and Republican Louisiana Sen. William Cassidy, who is the Committee on Health, Education, Labor, and Pensions ranking member. Foxx and Cassidy, alongside 67 other lawmakers, urged President Joe Biden to abandon the proposal in February, according to a press release.
“These student loan schemes do not cancel debt, they just transfer it from those who chose to take out loans to those who did not,” Cassidy said in a statement sent to the Daily Caller News Foundation. “President Biden’s IDR rule is not only irresponsible but deeply unfair to those who chose not to go to college or sacrificed to pay off their loans and will now have to foot the bill.”
The CBO estimated that the students would borrow more loans because of the plan’s “generous terms,” according to its letter.
“CBO estimates that under the proposed IDR plan, by fiscal year 2027 the total volume of student borrowing would rise by about 12 percent annually (or about $10 billion) above the amounts in the February 2023 baseline. That represents an increase of about 15 percent in undergraduate borrowing and about 10 percent in graduate borrowing,” it wrote.
The DOE estimated that the plan would cost nearly $138 billion between 2023 and 2032, according to the Federal Register. It estimated a $77 billion increase for outstanding loans and $61 billion for new loans during the time span.
The differences between the DOE and CBO estimates result from “the department’s assumptions that there would be no increase in enrollment in the proposed IDR plan among current or future borrowers and no increase in borrowing among eligible students in the future,” according to the letter. The CBO also established an 11-year baseline for its projections.
The DOE and Foxx did not immediately respond to the Daily Caller News Foundation’s request for comment. The CBO declined to comment.
All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact [email protected].