President Joe Biden's new plan to provide relief to student borrowers comes at a cost: $84 billion.
The price tag is based on an analysis released Thursday by the Penn Wharton Business Model. The $84 billion comes on top of the $475 billion Biden's Saving on a Valuable Education (SAVE) plan will cost, PWBM said.
Biden unveiled the proposal Monday during a speech in Madison, Wisconsin, saying it will assist at least 23 million borrowers.
The Supreme Court ruled last June the Biden administration's previous proposal overstepped its authority in trying to cancel or reduce student loans for millions of Americans. The 6-3 decision, with conservative justices in the majority, effectively killed the $400 billion plan, which would have erased up to $20,000 in student debt for borrowers earning less than $125,000 a year.
Biden's new proposal uses a different legal justification: the Higher Education Act, which allows the secretary of education to waive student loan debt in certain cases. The Education Department has been going through a federal rulemaking process to clarify how the secretary can invoke that authority.
Biden's new proposals include:
- Waiving accrued and capitalized interest for millions of borrowers up to $20,000,
- Eliminating student debt for borrowers in repayment for 20 years or more,
- Assisting borrowers who experience hardship in paying back their loans,
- Automatically discharging debt for borrowers eligible for loan forgiveness,
- And helping borrowers who enrolled in low-financial value programs or institutions.
While the SAVE plan spreads the $475 billion cost over 10 years, the $84 billion will accrue over a single year.
The biggest expense comes from waving accrued and capitalized interest for borrowers, impacting 16 million borrowers and costing $57.75 billion.
Eliminating student debt for borrowers in repayment for 20 years or more will impact 750,000 borrowers residing in households that, on average, earn $312,977 in annual income and cost $19 billion.
Assisting borrowers who experience hardship with paying back their loans will cost $7.24 billion.
On Tuesday, seven more states sued Biden, Education Secretary Miguel Cardona, and the U.S. Department of Education over the president's SAVE plan.
Led by Missouri Republican Attorney General Andrew Bailey, the lawsuit was joined by Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma.
A previous lawsuit was filed in March by 11 states, led by Kansas Attorney General Kris Kobach. Alabama, Alaska, Idaho, Iowa, Louisiana, Montana, Nebraska, South Carolina, Texas, and Utah joined Kansas in the suit.
Information from Reuters was used in this report.
Sam Barron ✉
Sam Barron has almost two decades of experience covering a wide range of topics including politics, crime and business.
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