- The U.S. Department of Education’s planned regulatory changes to student loan repayment plans that are income based will cost the federal government at least $230 billion over the next decade, the nonpartisan Congressional Budget Office has newly estimated.
- The proposed rule for income-driven repayment, or IDR, would allow borrowers enrolled in these plans to pay 5% monthly of what the Education Department considers discretionary income. Currently, most borrowers must pay 10% of that income.
- CBO estimates released Monday suggest the cost of current outstanding loans would rise by $76 billion, while the cost of ones originated over the next 10 years will jump by $154 billion.
The Biden administration has made repairing the beleaguered federal student loan system a primary goal.
It has tried to wipe away up to $20,000 in debt for some borrowers earning up to $125,000, a debt forgiveness program that stalled in court after conservatives alleged executive overreach. The U.S. Supreme Court recently heard oral arguments in lawsuits against the initiative, which legal pundits predict will be found illegal.
The cost of the administration’s IDR regulatory proposal will be even higher should the Supreme Court invalidate the debt cancellation measure, the CBO said. That’s because borrowers who would have benefited from the broad loan cancellation will likely instead turn to an income-driven plan to repay their debt.
In that scenario, the federal government would be looking at $46 billion more in outstanding loan costs, for a total extra expense of $276 billion.
The report gave congressional Republicans who have 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, a North Carolina Republican and chair of the House Education and the Workforce Committee, said in a statement. “Transferring $230 billion from borrowers who willingly took out debt to taxpayers who did not is fiscally irresponsible and morally reprehensible. Make no mistake, I soundly reject this illegal abuse of power.”