Diving overview:
- The U.S. Department of Education’s planned regulatory changes to income-based student loan repayment plans will cost the federal government at least $230 billion over the next decade. The Congressional Budget Office has newly estimated.
- The proposed rule for income-driven repayment, or IDR, would allow borrowers enrolled in these plans pay 5% monthly of what the Ministry of Education considers voluntary income. Currently, most borrowers must pay 10% of that income.
- CBO estimates released Monday indicate that the cost of current outstanding loans will rise by $76 billion, while the cost of loans originated over the next 10 years will rise by $154 billion.
Diving statistics:
The Biden administration has made fixing the beleaguered federal student loan system a primary goal.
She tried to wipe out debts of up to $20,000 for some borrowers making up to $125,000, a debt-forgiveness program that stalled in court after conservatives allegedly overreached. The U.S. Supreme Court recently heard oral arguments in lawsuits challenging the initiative, which legal scholars predict will be found illegal.
The cost of the administration’s proposal to regulate IDRs will be even higher if the Supreme Court strikes down the debt relief measure, CBO said. That’s because borrowers who would benefit from large-scale loan cancellation are likely to turn to an income-based debt repayment plan instead.
In this scenario, the federal government would be looking at $46 billion more in outstanding borrowing costs, for a total additional cost of $276 billion.
The report gave congressional Republicans who opposed the plan more political ammunition.
“The administration’s income-driven repayment rule is nothing more than a backdoor attempt to provide free college by executive fiat,” Virginia Foxx, R-North Carolina and chairwoman of the House Education and Workforce Committee, said in a statement. “To transfer $230 billion from borrowers who willingly took on debt to taxpayers who did not is fiscally irresponsible and morally reprehensible. Make no mistake, I strongly reject this illegal abuse of power.”
