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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowForgiving student loan debt will cost between $300 billion and $980 billion over 10 years, according to a new analysis, with the majority of relief going toward borrowers in the top 60% of earners.
The Penn Wharton Budget Model estimate was released Tuesday ahead of President Joe Biden’s long-anticipated decision as soon as this week on whether to forgive some student loan debt. White House officials have been trying to combat critiques that such a move would add to rampant inflation that’s become a political liability for Biden and his fellow Democrats.
The Penn Wharton budget group, based out of the University of Pennsylvania and run by a top former Treasury official under Republican President George W. Bush, is influential with key Capitol Hill lawmakers, including Democratic Sen. Joe Manchin.
The group estimated that between 69% and 73% of any debt forgiven would accrue to households that rank in the top 60% of the U.S.’s income distribution.
Biden allies and debt-relief advocates expect the administration to extend its current pause on student loan repayment through the end of the year, while also announcing plans to forgive as much as $10,000 in student debt for borrowers whose income falls below $125,000 a year.
Inside the administration, there has been discussion in recent weeks on forgiving a higher amount of debt for low-income borrowers who have received Pell grants, according to people familiar with the discussions.
During the 2020 presidential campaign, Biden urged Congress to forgive $10,000 in student loan debt, while progressive lawmakers, including Sen. Elizabeth Warren, and civil rights groups such as the NAACP are pressing him to forgive at least $50,000.
Loan forgiveness has become a tricky issue for the White House, as it tries to appeal to younger voters ahead of the midterms, while also trying to show Democrats as good stewards of the economy. Democrats risk losing their slim House and Senate majorities when voters go to the polls in November.
Penn Wharton estimates a one-time maximum debt forgiveness of $10,000 per borrower would cost roughly $300 billion if the relief is limited to those with incomes less than $125,000. The cost increases to $330 billion if the program is continued over a decade.
Eliminating the income threshold would raise the 10-year cost to $344 billion, while increasing the maximum amount forgiven to $50,000 per borrower would raise the total cost to as much as $980 billion, according to the analysis.
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What is the cost to service these loans in comparison?
All recent studies show the US Government is somehow losing money while gouging borrowers at 7.5%+…
And how much revenue is freed up from not being obligated to student loans? People permanently having a few extra hundred bucks in their pocket, compared to when student loan payments were active, would be a boon for local economies.
Why am I paying for someone else’s education? No one paid for mine? Waive interest, but don’t pay for loans. Once it starts, everyone will have a hand out.
Sadly, David G., they already do…
Biden has to buy votes somehow. Sad to see what we have become.
Nat W.: Not to go all ad hominem, but the “No one paid for mine?” argument is probably more nuanced than that. There were no public subsidies of any kind to your schools? No grants? It was all 100% privately funded? And “everyone will want a hand out?” So many industries get hand-outs at this point, I think we’ve crossed that moral threshold. There are strong arguments against student loan waivers; those aren’t them.
I didn’t go to college can I get on the gravy train and get the $150K Porsche I would like to have paid for, seems reasonable to me!
Why not print another trillion and call it Starbuck Barista Inflation Relief. No one told me you where only qualified to pour coffee with an French Literature doctorate?
I know it doesn’t cost the taxpayers anything the government is pay for it! Question: what is it the Federal Government produces?
Devalued money caused by inflation, no high prices are result of devalued money. About 15% for those of you playing the home game, not the 9.1% as advertised.
What do the people who never attended college get out of this O’Biden cash give away? What do the people who busted their asses to pay for their children or themselves to attend college get from the O’Biden cash give away? Do college students next year get O’Biden free money too?
Let’s reinforce the values of hard work and dedication to achieve goals and stop this whining and begging for “free” government handouts.
Or let’s get back to the government fully funding public college education. Like the world we believe we compete with who focus on the education and well being of children through college. Half the problem is we have allowed any college to pop up and take from the government pot and two states dropping funding of public colleges due to loan money being available.
Always a good idea to pay back what you owe.
How about lowering the interest rates or making the payments tax deductible?
Forgiving loans sets a horrible precedent and is irresponsible.
This penalizes students who chose affordable colleges so that they could avoid large loans and it rewards those who chose expensive colleges requiring larger loans. Students made their choices and there is absolutely no reason those who signed agreements to repay loans should not have to follow through on their commitments. Those who worked to pay their way through college should not have their tax money go towards a free ride for others.
I paid for my college education, with part time jobs and loans. I paid for my kids college education from a college savings plan. Now I have to pay for someone else who borrowed to get a degree they foolishly chose that does not get them a good paying job?
There are now more takers than givers to the US government. It’s getting very old. We need a big change.