Biden’s new student loan forgiveness program will cost taxpayers $475 BILLION over the next 10 years, economic model predicts

President Joe Biden’s new student loan forgiveness plan based on income-driven repayments will cost taxpayers $475 billion over the next ten years, an economic model has predicted.

The Penn Wharton Budget Model lays out the sum of one of Biden’s new pushes to give millions of Americans debt relief – after the Supreme Court struck down his first plan two weeks ago.

A conservative estimate sees the program costing as little as $390.9 billion over a decade, while the maximum projection puts the bill at $558.8 billion. 

The medium estimate was worked out at $474.9 billion – more than the projected cost of the original bailout.

It follows the announcement from the Biden administration on Friday that $39 billion would be forgiven for 804,000 Americans.

President Joe Biden’s new student loan forgiveness plan based on income-driven repayments will cost taxpayers $475 billion over the next ten years, an economic model has predicted

The model shows an exponentially growing amount of student loan debt over the next 10 years that will see taxpayers paying off nearly $500 billion

A parallel plan, Saving on a Valuable Education (SAVE), set to go into effect on July 1, 2024, would cut monthly income-based payments in half.

It would also get rid of monthly payments for minimum-wage earners and forgive all outstanding debt for Americans who have been paying for ten years and took out less than $12,000. 

The model found that this would also put a significant burden on taxpayers. 

The results state that taxpayers will face $200 billion in cases because of payment reductions on the $1.64 trillion in loans outstanding in  2023.

The remainder, roughly $275 billion, comes from reduced payments for about $1.03 trillion in new loans that the model estimates will be spread over the next 10 years. 

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‘We estimate a take-up rate for future loans of 70 percent, implying that about $645 billion in future loans will be subsidized’, the economists stated in their conclusion.

‘About 6.57 percent of future borrowers (or 4.98 percent of total predicted loan volume) will never have to make any payments under SAVE.’

Penn Wharton economist Junlei Chen wrote: ‘Due to the increased generosity of the newly proposed IDR plan, future student borrowers have the incentive to increase their federal student loan borrowing, shifting the current college financing pattern towards more loan borrowing instead of paying out-of-pocket. 

‘Under this scenario, we consider the situation where future students react to the increased generosity by maxing out the federal direct loan amount available to them.’

The Supreme Court justices ruled in a 6-3 decision that the Education Secretary had no authority to wipe the debts of 20 million borrowers 

Under this plan most community college students would not have to pay back any debt, the Biden administration said.

The announcement from Education Secretary Miguel Cardona on Friday was called a ‘slap in the face’ for taxpayers.

David Williams, President of the Taxpayers Protection Alliance, told DailyMail.com: ‘This new announcement is absurd and is a slap in the face to taxpayers.

‘The Biden administration is hell-bent on recklessly spending hundreds of billions of taxpayer dollars bailing out wealthy student loan borrowers, even after being rebuked by the country’s highest court.

‘More than 80 percent of the country that doesn’t have student loans will be forced to subsidize the small percentage of Americans that do have loans. And, once again, the Biden administration is circumventing Congress.

‘Whether it’s mission creep by agencies such as the Federal Trade Commission with politically motivated antitrust lawsuits, the Securities and Exchange Commission with ESG rules, or the latest Department of Education ending with student loans, these actions must be stopped immediately.’

After the Supreme Court justices ruled 6-3 to strike Biden’s initial plan down, the administration stated immediately that they would continue the push for millions in relief. 

The high court decided the Education Secretary had no authority to wipe the debts of 20 million borrowers.

It followed fury from taxpayers who have never been to college and Republicans claiming middle-class Americans were funding a bailout for students.