President Biden’s new student debt relief plan is estimated to cost around $84 billion if it is implemented, according to a Penn Wharton Budget Model (PWBM) analysis released Thursday.
PWBM analyzed the five components of Biden’s proposed plan, totaling the initiatives to $84.06 billion that could be implemented before the November election.
The biggest cost of the plan is Biden’s proposal to cancel up to $20,000 for all borrowers who have a balance that has grown due to unpaid interest. Borrowers who qualify for the SAVE plan or other income-driven repayment (IDR) plans would get all of that balance wiped out.
This would give partial or total relief on unpaid interest growth to more than 25 million borrowers, costing an estimated $57.75 billion, according to the budget model.
The second group, those who have been paying on their loans for more than 20 years, would get their debt canceled. The analysis estimates that it will cost $19.07 billion.
Another aspect of Biden’s plan would be helping borrowers experiencing hardship, such as those at high risk for defaulting or carrying other significant debts, such as medical debt. The analysis says that would cost $7.24 billion.
Biden’s plan would also forgive the debts of those who qualify for loan forgiveness under other IDR plans, but the analysis did not include that number since it was already included in PWBM’s analysis of the administration’s SAVE plan. The analysis estimates Biden’s SAVE plan would cost $475 billion.
Lastly, Biden wants to forgive the debt of those who were enrolled in educational programs that are known for low financial outcomes. This figure was also not calculated in the analysis due a lack of information on how that part of the plan would work.
“We estimate that the New Plans will cost $84 billion in addition to the $475 billion that we estimated for President Biden’s SAVE plan, for a total cost of about $559 billion across both plans,” PWBM said.