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Biden’s New Student Loan Forgiveness Plan Will Cost Taxpayers $559 Billion

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Biden’s New Student Loan Forgiveness Plan Will Cost Taxpayers $559 Billion
Source: Pinterest

Biden’s New Student Loan Forgiveness Plan Will Cost Taxpayers $559 Billion

Source: Pinterest

President Joe Biden’s plan to forgive student loans sounds great. However, his plan comes with some unforeseen burdens to taxpayers.

Forgiving Loans

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Ever since Biden’s administration announced its intention to forgive student loans, there have been several think pieces on the subject. The borrowers mostly have no complaints but some critics have voiced their displeasure. A recent study now shows that this plan will place a heavy burden on the taxpayers in the country. Therefore, this has caused more uproar and uncertainty for the plan.

The Study and New Plans

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The University of Pennsylvania carried out a study analyzing the president’s student debt relief using the Penn Wharton Budget Model. According to the results of their analysis, the total cost of the student forgiveness plans will have a huge financial impact on taxpayers. They will bear a huge sum of $559 billion, and homes that earn more than $300,000 every year will benefit the most from this.

Increase In Budget

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The initial Budget Model estimated the cost implications for Biden’s SAVE plan to be about $475 billion. However, this was reviewed as there is now a new set of plans in place. Over the span of a decade, the new plans will add about $84 billion to the initial budget. Therefore, this brings the new total to a whopping $559 billion!

The SAVE plan

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Biden’s administration’s SAVE plan kicked off last summer in 2023. SAVE is an acronym for “Saving on a Valuable Education,” and it is an income-driven repayment scheme that allows borrowers to be eligible for complete loan forgiveness if they earn less than the federal poverty limit. Since its launch, over 7.5 million borrowers have applied, and those who had been repaying their student loans for at least 10 years were granted forgiveness.

High-Income Households

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The relief plan also applies to high-income households despite the new price increase of over $500 billion. This also includes about 750,000 households who are making over $312,000, which is the average household income. The study also shows that the SAVE plan hopes to provide long-term debt-free relief to both high and lower-income households as both can benefit from them.

Average Debt Relief Increased

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The relief plan for high-earning households is a little different. For those earning more than 312,000 annually with more than 20 years in repayment, they will receive an average relief of $25,541.39 under the new plan. Notably, this is much higher than the average student debt forgiveness of $4,899.26 that was initially announced to the public.

Erasing Older Debts

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Those who have been paying off their student debts for a long time also have a chance to benefit from this plan. The Biden administration intends to cancel their student loan debts for those borrowers who have entered repayment 20 years ago and have undergraduate student debt. This also applies to those who first entered repayment for over 20 years in general.

Republicans Criticize the Plan

Source: X/Jodey Arrington

Unsurprisingly, this new Penn Wharton Budget Model has sparked a lot of political debate. Thanks to the already heated climate of an election year, Republicans are criticizing Biden’s plan repeatedly. One party member and House Budget Committee Chairman, Jodey Arrington, took a shot at the president’s plan, calling it unconstitutional. He also accused Biden of using the forgiveness plan as a “quest to buy votes.”

America’s Debt Increase

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In a statement, the Republican wrote, “In reality, his plan will shift the responsibility of paying for loans owed by high-income earners who freely incurred them onto the backs of all taxpayers, many of whom do not even have a college degree.”
He added, “[Biden’s] administration is dead set on circumventing the Supreme Court, defying Congress, and saddling our country with more debt.”

Biden Vs. 11 Republican States

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The president’s SAVE plan was not the first one he had to address student loans. In fact, this only commenced after the Supreme Court canceled his earlier plan to erase a $430 billion debt. Eleven republican leaders, including Texas, Alaska, and Louisiana, filed a lawsuit against the president and Education Secretary Miguel Cardona, showing their opposition to the SAVE plan.

Biden Administration Remains Steadfast

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The Biden administration has faced much criticism since it announced the loan forgiveness plan. However, the resident and his associates remain committed to their cause. Cardona also argued that the president’s policies are still sound and will “give hardworking Americans some breathing room.” According to him, Biden’s administration “will remain relentless in our pursuit to bring relief to millions across the country.”

Borrowers Are Relieved

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The borrowers who will benefit from this program have no complaints and are happy to be relieved of the heavy burden. “We don’t want our loans dictating our life choices and us not being able to do other things because we’re paying so much money. The SAVE plan is definitely a game changer for us,” said Lauran Michael, an interior designer in Raleigh, North Carolina.