The Biden administration's regulatory changes to the Income Driven Repayment program for student loans are expected to cost taxpayers nearly $500 billion over a decade, according to a new report.
The report from the Penn Wharton School of Business said the changes to the program, which allows borrowers to make payments on their student loans based on their income level, will incur a net cost of $475 billion over the next 10 years.
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Last year, the administration announced it would be making significant changes to the IDR program. Previously, borrowers had to pay 10% of their discretionary income above the poverty line, and could get their loans forgiven after 20 years. The new regulations lowered the required payment to 5%, and lowered the threshold for forgiveness to 10 years.
The report says that $200 billion of the estimated cost is the direct result of lowered payments for existing student loans. The university estimates that 53% of all federally held student loans will be shifted to Income Driven Repayment. The rest of the expected cost will come from loans that have not yet been disbursed but will be in the coming years.
The changes to the IDR program are just one of the Biden administration's efforts to limit the number of student loans that borrowers have to repay. The president sought to forgive up to $20,000 in federally held student loans for borrowers making less than $125,000, but the Supreme Court struck down the effort as an overreach of executive power. The administration is currently looking toward alternative means of enacting the same forgiveness plan.
The latest report from the Wharton School of Business provided fodder for the president's political rivals, with Sen. Bill Cassidy (R-LA) saying the report was proof that the change to the IDR program is "as irresponsible as it is unfair.
“Make no mistake, Biden’s newest student loan scheme only transfers the burden from those who willingly took out loans to Americans who never attended college or who already fulfilled their commitment to pay off their loans," Cassidy said.
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White House press secretary Karine Jean-Pierre dismissed the Penn Wharton report during a press briefing this week, saying that the Department of Education had estimated the cost to be $156 billion over 10 years.
"The reason why we believe this is being done in a responsible way... [is] because the progress that we have done, we have done to — to make sure that the deficit is coming down," Jean-Pierre said. "And that is something that the president has done."