President Biden’s changes to the income-driven repayment (IDR) plans could cost around $475 billion over a 10-year budget window, according to the Penn Wharton Budget Model.
The administration introduced the Saving on Valuable Education (SAVE) plan earlier this year to transform the IDR system in a move that could save thousands of dollars for student loan borrowers.
The final changes to the plan, such as cutting discretionary income for repayments from 10 percent to 5 percent, raising the federal poverty guidelines from 150 percent to 225 percent and covering the interest on loans that are not covered under the plan, will be implemented over the next year.
The changes would make it so a single person making less than $32,805 per year or a family of four making less than $67,500 per year will pay $0 per month on student loans.
But, this will come at a price.
The model predicts $200 billion will go toward payment reductions from the $1.64 trillion in outstanding loans in 2023, while the other $275 billion would go toward the $1.03 trillion in outstanding loans expected over the next 10 years.
It is predicted that around 6.57 percent of future borrowers wouldn’t have to pay any money back under this plan.
On the conservative side, the model says the program could cost around $390 billion, while the maximum projection is more than $558 billion.
The costs of these programs have been a major concern to Republicans who have been against these changes and any sort of student debt relief.
“The administration’s Income-Driven Repayment rule is nothing more than a backdoor attempt to provide free college by executive fiat,” said Education and the Workforce Committee Chairwoman Virginia Foxx (R-N.C.).
The Department of Education has called the SAVE program the “most generous” plan ever given to student borrowers to repay their debts.
The administration estimates the plan will save an individual borrower more than $1,000 per year and a family of four more than $2,200 per year.