Wharton Business School budget model crunches the numbers on Biden’s Student Loan Forgiveness Plan:
- We estimate that President Biden’s proposed student loan debt cancellation alone will cost between $469 billion to $519 billion over the 10-year budget window, depending on whether existing and new students are included. About 75% of the benefit falls to households making $88,000 or less per year.
- Loan forbearance for 2022 will cost an additional $16 billion.
- Under strict “static” assumptions about student borrowing behavior and using take-up rates within existing income-based repayment programs, the proposed new IDR program will cost an additional $70 billion, increasing total package costs to $605 billion.
- However, depending on future details of the actual IDR program and concomitant behavioral changes, the IDR program could add another $450 billion or more, thereby raising total plan costs to over $1 trillion.
In July 2021, Nancy Pelosi stated the President has no power to forgive such loans: “People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress…And I don’t even like to call it forgiveness because that implies a transgression. It’s not to be forgiven, just freeing people from those obligations.”
(She has recently flip-flopped on her position).
“National emergencies” grant the President extra-ordinary powers, whether student loans or climate change.