President Biden’s newly proposed student debt relief plan could potentially cost approximately $84 billion, based on an analysis conducted by the Penn Wharton Budget Model (PWBM) and released on Thursday.
According to PWBM’s analysis, Biden’s proposed plan consists of five components, which amount to a total of $84.06 billion. These initiatives have the potential to be implemented before the upcoming November election.
One of the most significant expenses within the plan revolves around Biden’s proposition to eliminate a maximum of $20,000 for borrowers carrying balances that have accumulated due to unpaid interest. Those who meet the criteria for the SAVE plan or other income-driven repayment (IDR) plans would have their entire outstanding balance eradicated.
According to the budget model, more than 25 million borrowers would receive partial or total relief on unpaid interest growth, amounting to an estimated $57.75 billion.
The second group, consisting of individuals who have diligently made loan payments for over 20 years, would have their debt completely forgiven, according to the analysis. The projected cost of this measure is estimated to be $19.07 billion.
Biden’s plan also aims to assist borrowers who are facing financial difficulties, particularly those who are at a high risk of defaulting or burdened with significant debts, such as medical expenses. This initiative is estimated to require a budget of $7.24 billion.
Biden’s proposal would also provide loan forgiveness to individuals who are eligible for debt relief under other IDR plans. However, the analysis did not consider this figure separately, as it was already accounted for in PWBM’s evaluation of the administration’s SAVE plan. According to the analysis, Biden’s SAVE plan is projected to have a cost of $475 billion.
Lastly, Biden aims to provide debt forgiveness for individuals who participated in educational programs that have a history of yielding low financial outcomes. Unfortunately, the analysis does not include this aspect of the plan as there is insufficient information available on its implementation.
The Penn Wharton Budget Model (PWBM) has projected that the new plans proposed by President Biden will amount to approximately $84 billion in additional costs. This is on top of the previously estimated $475 billion for the SAVE plan, bringing the total cost to approximately $559 billion for both plans.
