Joe Biden’s income-driven student loan repayment program will cost up to $559 billion over ten years. People who didn’t take out the loans will get to pay them.
An analysis was conducted by the University of Pennsylvania’s Penn Wharton Budget Model.
The Education Department announced the final regulations for the “SAVE” plan last week to circumvent the Supreme Court ruling invalidating Biden’s student loan forgiveness plan. This is more forgiveness courtesy of the taxi driver in Peoria and the waitress in Fargo.
Wharton’s $559 billion figure is its upper estimate and will happen if future students max out the available federal direct loans.
The minimum prediction is that it will cost $391 billion if students do not heavily increase borrowing.
Who thinks they won’t maximize borrowing that ends up forgiven? Anyone? Anyone?
Penn Wharton includes one increase in borrowing:
According to IPEDS data, in 2021 approximately 1 million students were enrolled in community colleges that did not provide access to the Title IV federal student loan program. Most of these community colleges voluntarily do not participate in the Title IV student loan program because a high cohort default rate (CDR) could jeopardize their access to other Title IV funds, such as the Pell Grant.
However, because the proposed IDR plan introduces auto-enrollment with borrowers who are 75 days delinquent or more, the CDR merit of these community colleges would dramatically drop, allowing them to be able to participate in the federal student loan program under the new circumstance.
Penn Wharton’s estimate, released Monday, finds that nearly $200 billion of the SAVE program’s medium estimated cost is the result of $1.64 trillion in currently outstanding loans. More than half of that amount is expected to move to SAVE after launching the program in July 2024.
About $200 billion of that cost will come from payment reduction for the $1.64 trillion in loans already outstanding in 2023, Penn Wharton reports.
“We estimate that about 53 percent of the current loan volume will move to SAVE after it goes active in July 2024, implying that about $869 billion will be subject to enhanced subsidies under SAVE. The remainder of the budget cost, or about $275 billion, comes from reduced payments for about $1.03 trillion in new loans that we estimate will be extended over the next ten years.”
OPINION
This is a cynical vote buy from the White House. We all know it.
Officials say the new effort will address “historical inaccuracies” in counting payments that could qualify toward a different income-driven repayment plan.
I remember how early in our marriage we struggled to pay off my wife’s loan debt as rapidly as possible. Our income was fairly low, but we did not want to let the interest grow and we put everything in to getting it paid in a few years.
This whole thing about college debt forgiveness, especially remembering all the playing around many of my classmates did instead of studying makes me sick.
I guess I will go to Vegas and if I lose the Federal Government should pay my debt!