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President Biden’s new plan to forgive some or all student loans for 26 million Americans would cost about $84 billion over 10 years, according to economists at the Penn Wharton Budget Model, a nonpartisan research organization at the Wharton School of the University of Pennsylvania.
When combined with the administration’s income-driven repayment plan, known as Saving On a Valuable Education, the total cost would be $559 billion.
The administration, which this week previewed its plan to provide debt relief for borrowers who fall into five discrete categories, has not yet released a cost estimate. More details about the expected cost should be included in the proposed regulatory changes that will be published in coming weeks.
Individuals who owe more than they initially borrowed could have all their accrued interest eliminated if they earn less than $120,000 and are enrolled in SAVE. Waiving the interest for borrowers will cost about $58 billion, according to the analysis.
The potential costs of this attempt at debt relief pale in comparison to estimates for SAVE, which offers borrowers more generous repayment terms and quicker paths to forgiveness than other federal repayment plans, and to those for Biden’s initial plan for student loan forgiveness that was struck down by the Supreme Court last summer. Penn Wharton Budget Model has estimated that SAVE will cost about $475 billion over 10 years, while it calculated that the original student loan forgiveness plan would have had a price tag of about $519 billion.
