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President Biden’s latest plan to cancel student loan debt for millions of borrowers will cost taxpayers far more than its official price tag, and it could reach as high as three-quarters of a trillion dollars, according to a new report.
The administration’s proposal, announced last week, replaces the White House’s previous attempt to deliver broad student loan forgiveness, which was struck down by the Supreme Court.
President Biden speaks at the Pieper-Hillside Boys & Girls Club in Milwaukee on March 13, 2024. (Alex Wroblewski for The Washington Post via Getty Images) / Getty Images)
The Department of Education (DOE) estimates that the new plan, which would cancel student debt for up to 30 million borrowers, will cost around $150 billion over a decade. However, the Committee for a Responsible Federal Budget (CRFB) reported that depending on how the details shake out, it could cost three times that amount.
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The CRFB says the DOE’s estimate “excludes a proposal to allow the Secretary of Education to cancel debt for those facing hardship or likely to default. Including this provision, we estimate the plan could cost $250 billion to $750 billion, depending on how the additional cancellation is designed.”
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Biden’s forgiveness proposal announced on Monday includes five main provisions: Waiving accrued and capitalized interest for millions of borrowers; automatically discharging debt for borrowers otherwise eligible for loan forgiveness under SAVE, even for those who do not enroll in the program; eliminating student debt for borrowers in repayment for 20 years or more; helping borrowers who enrolled in low-financial-value programs or institutions; and assisting borrowers who experience hardship in paying back their loans.
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“It is unclear how the Administration will define hardship, but they discuss 16 possible criteria such as other consumer debt, age, and health care or housing expenses and also declare hardship could be defined based on ‘any other indicators of hardship identified by the Secretary,”’ the CRFB noted.
“In assessing default risk, the rule allows for cancellation for those with an 80 percent likelihood of default, as determined by the Secretary,” the report continued, adding, “Importantly, over $150 billion of debt is currently in default (and loans in default generally have around a 70 percent recovery rate).”
Student Loan Forgiveness Advocates rally outside of the Supreme Court of the United States after the nation’s high court stuck down President Biden’s student debt relief program on Friday, June 30, 2023 in Washington, D.C. (Kent Nishimura / Los Angeles Times via Getty Images / Getty Images)
The CRFB is not alone in reporting that the plan will cost taxpayers much more than the administration estimates. After it was released last week, the Wharton School of the University of Pennsylvania put the price tag at around $559 billion.
After his first plan was rejected, Biden vowed that he would “stop at nothing to find other ways to deliver relief to hard-working middle-class families,” and has since wiped away nearly $138 billion in federal student loans for almost 3.9 million borrowers through other actions while circumventing Congress, which holds the power of the purse.
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The president’s latest loan forgiveness plan comes as the U.S. national debt continues to surge, topping $34.6 trillion this week.
FOX Business’ Lawrence Richard contributed to this report.
