Costs of Student Loan Forgiveness to Taxpayers Nearly Double Initial Estimate — How It Breaks Down
In January, President Biden proposed a revamp of the student loan income-driven repayment (IDR) program that would cost taxpayers $138 billion over ten years. However, the Congressional Budget Office (CBO) released a revised estimate yesterday predicting the change would actually come with a price tag of $230 billion — or higher.
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Initially, the White House calculated that the new program implementation would cost $77 billion for outstanding loans and $61 billion for new loans. The CBO’s recent estimate reflects $76 billion in existing debt and $154 billion in future debt, attributing the substantial increase in projected new loans to:
- More borrowers taking advantage of the plan
- Schools increasing tuition to capitalize on the demand
- The government automatically enrolling delinquent borrowers into the plan
If the Supreme Court rules against Biden’s student loan cancellation plan of up to $20,000 in debt forgiveness per borrower, taxpayers can likely expect an even larger bill over the next decade. In this instance, the CBO projects an additional $46 billion in program costs, bringing the total to $276 billion. That’s because borrowers will flock to the plan as their next best option.
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If the proposed IDR plan, which would replace the current REPAYE plan, goes into effect, the lowest-earning borrowers would benefit from an 83% reduction in lifetime payments per dollar borrowed. Currently, Parent PLUS loan holders are ineligible for the new program.
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