A central piece of President Joe Biden’s student-debt reform package could cost as much as $361 billion over the next decade, according to a new estimate from the University of Pennsylvania’s Wharton School, Bloomberg News reported. The changes to income-driven repayment, which the Department of Education formally proposed earlier this month, would cut monthly bills for undergraduate borrowers in half and fast-track eventual forgiveness of the loans. Student loan experts have argued the reforms could prove more significant than Biden’s plan to forgive up to $20,000 in debt per person — and with one-time forgiveness hamstrung by the courts, the new IDR scheme may become the main pillar of the administration’s attempt to tackle Americans’ $1.6 trillion federal student-debt load. Relief, though, comes at a cost: The Department of Education projected a net federal budget impact of $137.9 billion through 2032, while the Wharton estimate of $333 billion to $361 billion is more than double that number. That’s because the government’s calculations assume that IDR enrollment would remain constant at around a third of total loan volume, while the Penn Wharton Budget Model projects the new IDR plan would encapsulate as much as 75% of eligible loans as more borrowers sign up for better benefits.
