Top Budget Group Calculates Up to $1 Trillion Price Tag for Biden’s Student Loan Cancellation Program

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The University of Pennsylvania’s Wharton Business Model calculates that President Joe Biden’s new student loan cancellation plan could cost over $1 trillion, depending on the program’s final parameters and people’s response to it.

Biden announced on Wednesday that he was unilaterally canceling up to $10,000 student loan debt for individuals earning $125,000 or less and families making $250,000 or less.

For those who received Pell Grants, they will be eligible for up to $20,000 in debt forgiveness, with the same income thresholds.

Biden also extended the current moratorium on repaying student loans until the end of December.

Payments on the loans were initially suspended during the economic disruption caused by the COVID-19 shutdowns in 2020.

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The Penn Wharton Business Model released its analysis of Biden’s new actions Friday, writing that the “new student loan forgiveness plan includes three major components. We estimate that debt cancellation alone will cost up to $519 billion, with about 75% of the benefit accruing to households making $88,000 or less.”

Loan forbearance — extending the repayment moratorium — “will cost another $16 billion,” the nonpartisan group added.

PWBM also delved into Biden’s new income-driven repayment program, which is part of his overall student loan plan, addressed in a White House fact sheet.

Do you think the federal government should cancel student loan debt?

Yes: 0% (0 Votes)

No: 0% (0 Votes)

The IDR program sets loan repayment thresholds based on the income of the borrower.

“The new income-driven repayment (IDR) program would cost another $70 billion, increasing the total plan cost to $605 billion under strict ‘static’ assumptions. However, depending on future IDR program details to be released and potential behavioral (i.e., ‘non-static’) changes, total plan costs could exceed $1 trillion,” PWBM concluded.

Multiple reporters have asked the White House how much the debt-cancellation program will cost.

On Thursday, a reporter questioned White House press secretary Karine Jean-Pierre, “Will the…


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