(Luis Cornelio, Headline USA) President Joe Biden’s student loan bailout plan is expected to cost approximately $475 billion over the next 10 years to taxpayers, which is over $45 billion more than the initial estimate.
According to a new study by the Penn Wharton Budget Model, this new estimate includes the Supreme Court’s major decision declaring Biden’s plan illegal.
“About $200 billion of that cost will come from payment reduction for the $1.64 trillion in loans already outstanding in 2023,” the report reveals. The Wharton Model warned that once the plan becomes active in July 2024, approximately 53 percent of the current “loan volume will move to the new plan.”
The remaining budget cost, approximately $275 billion, comes from reduced payments for about $1.03 trillion in new loans that are estimated to be extended over the next 10 years, according to the report.
As reported by the New York Post, the model estimates that the cost of the plan could range from $390.9 billion to $558.8 billion.
The study assumes a take-up rate of 70 percent for future loans, implying that roughly “$645 billion in future loans will be subsidized.” Additionally, the report highlights that approximately “6.57 percent of future borrowers (or 4.98 percent of total predicted loan volume) will never have to make any payments under SAVE.”
Penn Wharton economist Penlie Chen warned that the new plan is likely to drive higher loans. “ Due to the increased generosity of the newly proposed IDR plan, future student borrowers have the incentive to increase their federal student loan borrowing,” Penlie said, according to the Post.
Despite the Court’s ruling that the Education Department did not have the authority to appropriate funds for the plan, the Biden administration unleashed the new plan on June 30.
The Post reported that the new plan will take effect on July 1, 2024, and will erase monthly payments for minimum-wage earners. The Department of Education will also effectively eliminate the debt of individuals who took $12,000 or less over the course of 10 years.
Republican leaders met Biden’s new plan with extreme criticism, including Rep. Byron Donalds, R-Fla., who tweeted, “The Supreme Court blocked Biden’s original student loan bailout. Biden knows it’s unconstitutional & violates sep of powers but they’re pushing it through again. It’s not fair to force those who didn’t go to college to pay for the tuition of others.”
Sen. Bill Cassidy, R-La., echoed Donalds’s remarks in a press statement. Specifically, he said, “Make no mistake, Biden’s newest student loan scheme only transfers the burden from those who willingly took out loans to Americans who never attended college or who already fulfilled their commitment to pay off their loans.”
The Supreme Court blocked Biden’s original student loan bailout.
Biden knows it’s unconstitutional & violates sep of powers but they're pushing it through again.
It's not fair to force those who didn’t go to college to pay for the tuition of others.
We're working to stop this. pic.twitter.com/08hVe9B0Eh
— Congressman Byron Donalds (@RepDonaldsPress) July 19, 2023
