President Biden’s latest proposal for student loan cancellation is estimated to cost taxpayers $559 billion and primarily benefit households with annual incomes exceeding $300,000, according to a study by the University of Pennsylvania’s Penn Wharton Budget Model.
The new plan includes several provisions that, along with the existing Saving on a Valuable Education (SAVE) Plan, would cost an additional $84 billion over 10 years. The SAVE Plan, an income-driven repayment scheme introduced last summer, is projected to cost $475 billion over a decade.
The study indicates that the new plan will offer significant debt relief to about 750,000 households with an average income of $312,000. This is because the SAVE Plan already provides debt relief to lower-income households.
Households earning over $312,000, with over 20 years in repayment, are expected to receive an average of $25,541.39 in debt relief under the new plan, significantly higher than the $4,899.26 average.
Biden’s proposal would cancel student loan debt for borrowers with undergraduate debt who entered repayment 20 years ago, and for those with graduate debt who entered repayment 25 or more years ago, without income limits.
House Budget Committee Chairman Jodey Arrington criticized Biden’s plan, calling it unconstitutional and part of a strategy to gain votes. He argued that the plan would shift the burden of repaying loans from high-income earners onto all taxpayers.
The Penn Wharton model does not account for the administration’s announcement on April 12 to cancel an additional $7.4 billion in student debt for 277,000 borrowers.
Education Secretary Miguel Cardona defended the administration’s policies, stating they provide relief to hardworking Americans. He emphasized the administration's commitment to bringing relief to millions across the country.
According to the Education Department, at least 10% of borrowers have been approved for some form of debt relief under the Biden administration’s student loan cancellation programs.
