President Joe Biden’s new student loan forgiveness plan would cost tens of billions to implement on top of hundreds of billions that have already been proposed to address millions of Americans’ student debts, according to a budget model by the University of Pennsylvania.
Biden unveiled his newest student loan forgiveness effort on Monday, aiming to wipe away the debts of more than four million Americans and forgive at least $5,000 for more than 10 million. The plan would cost taxpayers around $84 billion on top of the $475 billion that the administration is expected to spend on previously announced student loan forgiveness initiatives over ten years, according to the Penn Wharton Budget Model.
Around $58 billion of the expected cost is the result of the suspension of accrued and capitalized interest for millions of borrowers, according to the model. Another $19 billion will go toward eliminating student debt for Americans who have been in repayment for 20 years or more, and around $7 billion will be used to assist borrowers who have experienced hardship repaying their loans.
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The model anticipates that around 17.2 million people will receive debt relief under the new plan, smaller than the 25 to 30 million that the Biden administration had estimated due to many people already falling under preexisting student loan forgiveness measures.
Biden’s original attempt to forgive student loans was struck down by the Supreme Court in June 2023 due to it being unconstitutional, with the court finding that the president does not have the power to cancel student debt.
After failing to push through the president’s original plan, the Biden administration announced that it would utilize the Higher Education Act and an expansion of income-driven repayment plans to wipe out many Americans’ student debt. Since then, the Biden administration has started several new initiatives to cancel student debt, skirting the Supreme Court decision.
Seven Republican attorneys general have already filed a lawsuit against the new plan following the announcement on Monday, arguing that the president lacks the authority to unilaterally cancel student loan debt.
The federal government was nearly $34.6 trillion in debt as of Tuesday, according to the Treasury.
