President Biden’s new student debt relief plan is estimated to cost about $84 billion if implemented, according to a Penn Wharton budget model released Thursday.
The model analyzes five elements of Biden’s proposed plan, totaling $84.06 billion in efforts that could be implemented before the November election.
The plan’s biggest cost is Biden’s proposal to cancel up to $20,000 for all borrowers whose balances have increased due to unpaid interest. Borrowers eligible for SAVE plans and other income-driven repayment (IDR) plans will have their balances erased in their entirety.
According to the budget model, this would partially or fully reduce the increase in unpaid interest for more than 25 million borrowers, at an estimated cost of $57.75 billion.
The second group, those who have continued to pay their loans for 20 years or more, will have their debts cancelled. This model estimates the cost to be $19.07 billion.
Another aspect of Mr. Biden’s plan will be to help struggling borrowers, including those at high risk of default or those with large debts, such as those for health care. That would cost $7.24 billion, according to the analysis.
Biden’s plan would also forgive debt for people eligible for loan forgiveness under other IDR plans, but that number was already included in the administration’s analysis of the SAVE plan, so the model Not included. The model estimates that Biden’s SAVE plan would cost $475 billion.
Finally, Biden wants to forgive debt for people who were in education programs known for poor economic outcomes. This was also not calculated into the model because there was a lack of information about how that part of the plan worked.
“We estimate that the new plan will cost $84 billion, on top of the $475 billion estimated in President Biden’s SAVE plan, bringing the total cost of both plans to approximately $559 billion,” the model said.
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